CNA Q3 Results Highlighted by ‘Steady Underwriting’

November 1, 2016

CNA Financial Corp. reported third quarter 2016 net income of $343 million and net operating income of $311 million.

The combined ratio for Property & Casualty Operations for the third quarter was 90.4. Property & Casualty Operations’ net operating income was $329 million for the third quarter as compared with $263 million in the prior year quarter, driven by higher net investment income. Catastrophe losses were $11 million, after tax, as compared with $10 million, after tax, in the prior year quarter. Catastrophe losses in the third quarter of 2016 resulted primarily from U.S. weather-related events.

Thomas F. Motamed, chairman and chief executive officer, called it a “strong” quarter highlighted by “steady underwriting performance” and continued favorable reserve development.

“Our disciplined actions have sustained an underlying loss ratio in line with where we ended 2015, despite challenging market conditions,” said Motamed, who is retiring and will be replaced by former Chubb executive Dino E. Robusto on Nov. 21.

Specialty Lines Results:
  • Net operating income increased $16 million for the third quarter of 2016 as compared with the prior year quarter, primarily due to an increase in net investment income partially offset by lower favorable net prior year reserve development and higher underwriting expenses.
  • The combined ratio increased 5.5 points as compared with the prior year quarter. The loss ratio increased 3.3 points due to lower favorable net prior year reserve development and a higher non-catastrophe current accident year loss ratio.
  • Net written premiums increased $26 million as compared with the prior year quarter, driven by growth in warranty and surety and continued steady retention. Average rate was flat for the policies that renewed in the third quarter of 2016 while achieving a retention of 87 percent.
Commercial Lines Results:
  • Net operating income increased $39 million for the third quarter of 2016 as compared with the prior year quarter, due to an increase in net investment income partially offset by higher underwriting expenses and higher net loss and loss adjustment expense.
  • The combined ratio increased 4.0 points as compared with the prior year quarter. The loss ratio increased 1.6 points due to an increase in the current accident year loss ratio and lower favorable net prior year development. Catastrophe losses were $12 million, or 1.6 points of the loss ratio, as compared to $10 million, or 1.4 points of the loss ratio for the prior year quarter. The expense ratio increased 1.9 points as compared with the prior year quarter, primarily due to non-recurring underwriting expenses related to the transition to a new service provider for our IT infrastructure and employee termination costs resulting from an organization review. The expense ratio also increased due to higher IT spending primarily related to a new underwriting platform.
  • Net written premiums increased $42 million as compared with the prior year quarter, driven by higher retention and new business in middle markets. Average rate was flat for the policies that renewed in the third quarter of 2016 while achieving a retention of 83 percent.
International
  • Net operating income increased $11 million for the third quarter of 2016 as compared with the prior year quarter, primarily due to improved net accident year non-catastrophe underwriting results and lower foreign exchange losses partially offset by lower favorable net prior year reserve development.
  • The combined ratio increased 2.8 points as compared with the prior year quarter. The loss ratio increased 3.0 points due to lower favorable net prior year reserve development partially offset by an improved non-catastrophe current accident year loss ratio.
  • Net written premiums increased $27 million as compared with the prior year quarter. Excluding the effect of foreign currency exchange rates and the timing of reinsurance spend, net written premiums for the third quarter of 2016 increased 15 percent. The majority of the growth came from middle market products in the UK and Continental Europe and from product lines which are now being delivered across all the international platforms, such as healthcare and technology. Average rate decreased 1 percent for the policies that renewed in the third quarter of 2016 while achieving a retention of 70 percent.

Source: CNA

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