CNA Reports Q2 Results with Improved P/C Underwriting

August 2, 2016

CNA Financial Corp. reported second quarter 2016 net income of $209 million and net operating income of $201 million.

“Overall I am pleased with the result this quarter. Although our International segment had a disappointing quarter, all of our North American businesses produced solid results, led by another great underwriting result in our Specialty segment,” said Thomas F. Motamed, chairman and chief executive officer of CNA Financial Corp.

Property & Casualty Operations‘ net operating income was $229 million for the second quarter of 2016 as compared with $237 million in the prior year quarter. The combined ratio for the quarter for Property & Casualty Operations was 97.4 compared with 98.4 in 2015.

Improved underwriting results were more than offset by foreign currency exchange rate losses and lower investment income. Catastrophe losses were $58 million compared with $39 million in the prior year quarter. Catastrophe losses in the second quarter of 2016 resulted primarily from U.S. weather-related events and the Fort McMurray wildfires.

Net investment income was $362 million as compared with $356 million in the prior year quarter.

Specialty Lines

Specialty provides management and professional liability and other coverages through brokers, independent agencies and managing general underwriters. In Specialty business, net operating income increased $27 million to $166 million for the second quarter. The combined ratio (85.4) improved 5.8 points as compared with the prior year quarter. Catastrophe losses were $9 million as compared to $5 million for the prior year quarter. The expense ratio increased 0.6 points as compared with the prior year quarter, primarily due to higher net commissions.

Net written premiums in Specialty increased $19 million as compared with the prior year quarter, reflecting steady retention, positive rate and a some new business. Average rate increased 1 percent for the policies that renewed in the second quarter of 2016 while achieving a retention of 86 percent.

Commercial Division

Commercial works with independent agents and brokers to market property/casualty insurance to small, middle-market and large businesses and organizations. Net operating income increased $14 million to reach $92 million for the second quarter of 2016 as compared with the prior year quarter.

The combined ratio for Commercial (103.5) improved 3.7 points as compared with the prior year quarter. Catastrophe losses were $55 million, or 8.0 points of the loss ratio, compared to $54 million, or 7.7 points of the loss ratio for the prior year quarter.

Net written premiums in Commercial increased $23 million as compared with the prior year quarter, driven by higher retention and a steady level of new business. Average rate was flat for the policies that renewed in the second quarter of 2016 while achieving a retention of 83 percent.

International

International provides property/casualty insurance on a global basis through its operations in Canada, the United Kingdom, Continental Europe and Singapore as well as through its presence at Lloyd’s of London. Net operating results decreased $49 million for the second quarter of 2016 as compared with the prior year quarter, primarily due to a higher level of large losses as well as higher catastrophe losses. Additionally, the comparison was negatively affected by $13 million due to fluctuations in foreign currency exchange rates.

The combined ratio (118.6) increased 26.4 points as compared with the prior year quarter (92.2). The loss ratio (79.8) increased 24.8 points due to an increase in the current accident year loss ratio driven by large losses related to political risk, property and financial institutions partially offset by higher favorable net prior year loss development. Catastrophe losses were $21 million, or 10.6 points of the loss ratio, primarily driven by the Fort McMurray wildfires, as compared to $1 million, or 0.8 points of the loss ratio for the prior year quarter.

Net written premiums for International decreased $55 million to $194 million compared with the prior year quarter. Average rate decreased 2 percent for the policies that renewed in the second quarter of 2016 while achieving a retention of 70 percent.

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