CNA 8-K
Cna Financial Corp (CNA)
8-K
2020-08-03
For: 2020-08-03
View Original
Added on
April 11, 2026
UNITED STATES
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 3, 2020
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) | ||
(Address of principal executive offices) (Zip Code)
(312 ) 822-5000
(Registrant's telephone number, including area code)
NOT APPLICABLE |
(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On August 3, 2020 , the registrant issued a press release and posted on its website (www.cna.com) a financial supplement providing information on its results of operations for the second quarter 2020. The press release is furnished as Exhibit 99.1 and the financial supplement is furnished as Exhibit 99.2 to this Form 8-K.
The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits:
See Exhibit Index.
EXHIBIT INDEX
Exhibit No. | Description | |
CNA Financial Corporation press release, issued August 3, 2020, providing information on the second quarter 2020 results of operations. | ||
CNA Financial Corporation financial supplement, posted on its website August 3, 2020, providing supplemental financial information on the second quarter 2020. | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
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 hereunto duly authorized.
CNA Financial Corporation | ||
(Registrant) | ||
Date: August 3, 2020 | By | /s/ Albert J. Miralles |
(Signature) | ||
Albert J. Miralles Executive Vice President and Chief Financial Officer | ||
FOR IMMEDIATE RELEASE
CONTACT:
MEDIA: | ANALYSTS: | |
Brandon Davis, 312-822-5885 | Al Miralles, 312-822-5605 | |
CNA FINANCIAL ANNOUNCES SECOND QUARTER 2020 RESULTS
• | 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 |
CHICAGO, August 3, 2020 --- CNA Financial Corporation (NYSE: CNA) today announced second quarter 2020 net income of $151 million, or $0.55 per share, and core income of $99 million, or $0.36 per share. Property & Casualty Operations combined ratio for the second quarter was 112.3%. Underwriting results for the second quarter of 2020 include previously announced net catastrophe losses of $301 million pretax, including $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather related events. The underlying combined ratio of 93.4% reflects a 0.4 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 0.9 points and increased the expense ratio by 0.5 points. Net investment income was $534 million pretax for the second quarter of 2020, including $84 million from limited partnership and common stock investments, reflecting the equity market rebound during the quarter.
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.
Our Life & Group and Corporate & Other segments produced core income (loss) for the second quarter of 2020 of $14 million and $(11) million, respectively.
CNA Financial declared a quarterly dividend of $0.37 per share, payable September 3, 2020 to stockholders of record on August 17, 2020.
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||
($ 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. |
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“Notwithstanding our second quarter results being impacted by considerable catastrophe losses from COVID-19 as well as civil unrest and weather related events, our underlying combined ratio improved year over year. As well, we benefited from accelerating P&C rate momentum and stable new business despite the economic disruption," said Dino E. Robusto, Chairman & Chief Executive Officer of CNA Financial Corporation.
Property & Casualty Operations
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 $50 million pretax charge for mass tort exposures, primarily due to New York reviver statute-related claims. |
• | The U.S. P&C segments, excluding third party captives, generated gross written premium growth of 8% and net written premium growth of 4%. Excluding third party captives, gross written premiums grew 7% and net written premiums grew 3% for P&C overall. |
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Business Operating Highlights
Specialty
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ 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 $1 million, or 0.1 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 2.9 points in the quarter compared with a 2.6 point improvement in the prior year quarter. |
• | Gross written premiums, excluding third party captives, grew 7% and net written premiums grew 4% for the second quarter of 2020 driven by strong rate. |
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Commercial
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ 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 $47 million related primarily to severe weather related events. Unfavorable net prior period development increased the loss ratio by 6.0 points in the quarter compared with 0.1 points of favorable development decreasing the loss ratio in the prior year quarter. |
• | Gross written premiums, excluding third party captives, grew 9% and net written premiums grew 4% for the second quarter of 2020 due to strong rate and higher new business. |
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International
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ 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 $1 million, or 0.2 points of the loss ratio, for the prior year quarter. Favorable net prior year development improved the loss ratio by 1.2 points in the quarter compared with a 0.1 point improvement in the prior year quarter. |
• | Excluding currency fluctuations, gross written premiums decreased 1% and net written premiums decreased 2% for the second quarter of 2020 driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Europe. |
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Life & Group
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ 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 | |||||||||||||||
Core income of $14 million for the second quarter of 2020 was primarily driven by better than expected persistency.
Corporate & Other
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net investment income | $ | 4 | $ | 7 | $ | 7 | $ | 14 | |||||||||||
Interest expense | 31 | 34 | 62 | 68 | |||||||||||||||
Core loss | (11 | ) | (11 | ) | (29 | ) | (17 | ) | |||||||||||
Core loss of $11 million for the second quarter of 2020 was consistent with the prior year quarter.
Net Investment Income
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 | |||||||||||||||
Pretax net investment income increased $19 million as compared with the prior year quarter. The increase was driven by limited partnership and common stock investments, which returned 5.0%, or $84 million in the second quarter of 2020 compared with 2.1%, or $43 million, in the prior year quarter.
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About the Company
CNA is one of the largest U.S. commercial property and casualty insurance companies. CNA provides a broad range of standard and specialized property and casualty insurance products and services for businesses and professionals in the U.S., Canada and Europe, backed by more than 120 years of experience and approximately $45 billion of assets. For more information, please visit CNA at www.cna.com.
Conference Call and Webcast/Presentation Information
A conference call for investors and the professional investment community will be held at 8:00 a.m. (CT) today. On the conference call will be Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation, Al Miralles, Executive Vice President and Chief Financial Officer of CNA Financial Corporation and other members of senior management. Participants can access the call by dialing (800) 289-0571, or for international callers, +1 (720) 543-0206. The call will also be broadcast live on the internet and may be accessed from the Investor Relations page of the CNA website (www.cna.com). A presentation will be posted and available on the CNA website and will provide additional insight into the results.
The call is available to the media, but questions will be restricted to investors and the professional investment community. An online replay will be available on CNA's website following the call. Financial supplement information related to the results is available on the investor relations pages of the CNA website or by contacting [email protected].
Definition of Reported Segments
• | 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). |
Financial Measures
Management utilizes the following metrics in their evaluation of the Property & Casualty Operations. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
• | 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. |
Gross written premiums ex. 3rd party captives represents gross written premiums excluding business which is mostly ceded to third party captives, including business related to large warranty programs.
The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.
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Reconciliation of GAAP Measures to Non-GAAP Measures
This press release also contains financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. The Company believes the presentation of these measures provides investors with a better understanding of the significant factors that comprise the Company's operating performance. Reconciliations of these measures to the most comparable GAAP measures follow below.
Reconciliation of Net Income to Core Income
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure.
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 | |||||||
Reconciliation of Net Income per Diluted Share to Core Income per Diluted Share
Core income (loss) per diluted share provides management and investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core income (loss). Core income (loss) per diluted share is core income (loss) on a per diluted share basis.
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 | |||||||
Reconciliation of Book Value per Share to Book Value per Share Excluding AOCI
Book value per share excluding AOCI allows management and investors to analyze the amount of the Company's net worth primarily attributable to the Company's business operations. The Company believes this measurement is useful as it reduces the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.
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 | |||
8
Calculation of Return on Equity and Core Return on Equity
Core return on equity provides management and investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to its business operations.
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. |
For additional information, please refer to CNA's most recent 10-K on file with the Securities and Exchange Commission, as well as the financial supplement, available at www.cna.com.
Forward-Looking Statements
This press release includes statements that relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected. Many of these risks and uncertainties cannot be controlled by CNA. For a detailed description of these risks and uncertainties please refer to CNA’s filings with the Securities and Exchange Commission, available at www.cna.com.
Any forward-looking statements made in this press release are made by CNA as of the date of this press release. Further, CNA does not have any obligation to update or revise any forward-looking statement contained in this press release, even if CNA’s expectations or any related events, conditions or circumstances change.
Any descriptions of coverage under CNA policies or programs in this press release are provided for convenience only and are not to be relied upon with respect to questions of coverage, exclusions or limitations. With regard to all such matters, the terms and provisions of relevant insurance policies are primary and controlling. In addition, please note that all coverages may not be available in all states.
“CNA" is a registered trademark of CNA Financial Corporation. Certain CNA Financial Corporation subsidiaries use the "CNA" trademark in connection with insurance underwriting and claims activities. Copyright © 2020 CNA. All rights reserved.
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9
CNA Financial Corporation
Supplemental Financial Information
June 30, 2020
This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K.
Table of Contents
Page | |
Consolidated Results | |
Statements of Operations | |
Results of Operations | |
International | |
Investment Information | |
Components of Net Investment Income | |
Other | |
Life & Group Policyholder Reserves | |
Statements of Operations
Periods ended June 30 | Three Months | Six Months | |||||||||||||||||||||
(In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net earned premiums | $ | 1,850 | $ | 1,824 | 1 | % | $ | 3,719 | $ | 3,627 | 3 | % | |||||||||||
Net investment income | 534 | 515 | 4 | 863 | 1,086 | (21 | ) | ||||||||||||||||
Net investment gains (losses) | 69 | (18 | ) | (147 | ) | 13 | |||||||||||||||||
Non-insurance warranty revenue | 308 | 285 | 609 | 566 | |||||||||||||||||||
Other revenues | 5 | 4 | 13 | 13 | |||||||||||||||||||
Total revenues | 2,766 | 2,610 | 6 | 5,057 | 5,305 | (5 | ) | ||||||||||||||||
Claims, Benefits and Expenses: | |||||||||||||||||||||||
Insurance claims and policyholders' benefits | 1,642 | 1,352 | 3,067 | 2,709 | |||||||||||||||||||
Amortization of deferred acquisition costs | 342 | 338 | 686 | 680 | |||||||||||||||||||
Non-insurance warranty expense | 285 | 263 | 566 | 523 | |||||||||||||||||||
Other operating expenses | 284 | 281 | 583 | 564 | |||||||||||||||||||
Interest | 31 | 34 | 62 | 68 | |||||||||||||||||||
Total claims, benefits and expenses | 2,584 | 2,268 | (14 | ) | 4,964 | 4,544 | (9 | ) | |||||||||||||||
Income (loss) before income tax | 182 | 342 | 93 | 761 | |||||||||||||||||||
Income tax (expense) benefit | (31 | ) | (64 | ) | (3 | ) | (141 | ) | |||||||||||||||
Net income (loss) | $ | 151 | $ | 278 | (46 | ) | % | $ | 90 | $ | 620 | (85 | ) | % | |||||||||
1
Components of Income (Loss), Per Share Data and Return on Equity
Periods ended June 30 | Three Months | Six Months | |||||||||||||||
(In millions, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Components of Income (Loss) | |||||||||||||||||
Core income (loss) | $ | 99 | $ | 294 | $ | 207 | $ | 612 | |||||||||
Net investment gains (losses) | 52 | (16 | ) | (117 | ) | 8 | |||||||||||
Net income (loss) | $ | 151 | $ | 278 | $ | 90 | $ | 620 | |||||||||
Diluted Earnings (Loss) Per Common Share | |||||||||||||||||
Core income (loss) | $ | 0.36 | $ | 1.08 | $ | 0.76 | $ | 2.25 | |||||||||
Net investment gains (losses) | 0.19 | (0.06 | ) | (0.43 | ) | 0.03 | |||||||||||
Diluted earnings (loss) per share | $ | 0.55 | $ | 1.02 | $ | 0.33 | $ | 2.28 | |||||||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||||
Basic | 271.5 | 271.6 | 271.5 | 271.6 | |||||||||||||
Diluted | 272.0 | 272.4 | 272.3 | 272.5 | |||||||||||||
Return on Equity | |||||||||||||||||
Net income (loss) (1) | 5.5 | % | 9.5 | % | 1.5 | % | 10.6 | % | |||||||||
Core income (loss) (2) | 3.4 | 9.9 | 3.5 | 10.2 | |||||||||||||
(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.
(2) Annualized core income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.
2
Selected Balance Sheet Data and Statement of Cash Flows Data
(In millions, except per share data) | June 30, 2020 | December 31, 2019 | |||||
Total investments | $ | 47,757 | $ | 47,744 | |||
Reinsurance receivables, net of allowance for uncollectible receivables | 4,435 | 4,179 | |||||
Total assets | 62,095 | 60,612 | |||||
Insurance reserves | 39,862 | 38,614 | |||||
Debt | 2,680 | 2,679 | |||||
Total liabilities | 50,450 | 48,397 | |||||
Accumulated other comprehensive income (loss) (1) | 154 | 51 | |||||
Total stockholders' equity | 11,645 | 12,215 | |||||
Book value per common share | $ | 42.91 | $ | 45.00 | |||
Book value per common share excluding AOCI | $ | 42.34 | $ | 44.81 | |||
Outstanding shares of common stock (in millions of shares) | 271.4 | 271.4 | |||||
Statutory capital and surplus - Combined Continental Casualty Companies (2) | $ | 9,952 | $ | 10,787 | |||
Three Months Ended June 30 | 2020 | 2019 | |||||
Net cash flows provided (used) by operating activities | $ | 438 | $ | 227 | |||
Net cash flows provided (used) by investing activities | (612 | ) | (56 | ) | |||
Net cash flows provided (used) by financing activities | (101 | ) | (123 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | (275 | ) | $ | 48 | ||
Six Months Ended June 30 | 2020 | 2019 | |||||
Net cash flows provided (used) by operating activities | $ | 650 | $ | 514 | |||
Net cash flows provided (used) by investing activities | 475 | 233 | |||||
Net cash flows provided (used) by financing activities | (776 | ) | (788 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | 349 | $ | (41 | ) | ||
(1) As of June 30, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $2,342 million and $2,198 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, an increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).
(2) Statutory capital and surplus as of June 30, 2020 is preliminary.
3
Property & Casualty - Results of Operations
Periods ended June 30 | Three Months | Six Months | |||||||||||||||||||||
(In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Gross written premiums | $ | 3,165 | $ | 3,035 | 4 | % | $ | 6,248 | $ | 6,001 | 4 | % | |||||||||||
Gross written premiums ex. 3rd party captives | 2,132 | 2,000 | 7 | 4,239 | 3,987 | 6 | |||||||||||||||||
Net written premiums | 1,930 | 1,874 | 3 | 3,793 | 3,680 | 3 | |||||||||||||||||
Net earned premiums | 1,724 | 1,694 | 2 | 3,466 | 3,368 | 3 | |||||||||||||||||
Net investment income | 324 | 303 | 442 | 663 | |||||||||||||||||||
Non-insurance warranty revenue | 308 | 285 | 609 | 566 | |||||||||||||||||||
Other revenues | 5 | 3 | 13 | 11 | |||||||||||||||||||
Total operating revenues | 2,361 | 2,285 | 3 | 4,530 | 4,608 | (2 | ) | ||||||||||||||||
Insurance claims and policyholders' benefits | 1,356 | 1,055 | 2,479 | 2,125 | |||||||||||||||||||
Amortization of deferred acquisition costs | 342 | 338 | 686 | 680 | |||||||||||||||||||
Non-insurance warranty expense | 285 | 263 | 566 | 523 | |||||||||||||||||||
Other insurance related expenses | 236 | 229 | 468 | 454 | |||||||||||||||||||
Other expenses | 21 | 22 | 53 | 49 | |||||||||||||||||||
Total claims, benefits and expenses | 2,240 | 1,907 | (17 | ) | 4,252 | 3,831 | (11 | ) | |||||||||||||||
Core income (loss) before income tax | 121 | 378 | 278 | 777 | |||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (25 | ) | (80 | ) | (60 | ) | (165 | ) | |||||||||||||||
Core income (loss) | $ | 96 | $ | 298 | (68 | ) | % | $ | 218 | $ | 612 | (64 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (210 | ) | $ | 72 | N/M | % | $ | (167 | ) | $ | 109 | N/M | % | |||||||||
Loss & LAE ratio | 78.4 | % | 61.9 | % | (16.5 | ) | pts | 71.2 | % | 62.7 | % | (8.5 | ) | pts | |||||||||
Expense ratio | 33.6 | 33.4 | (0.2 | ) | 33.2 | 33.7 | 0.5 | ||||||||||||||||
Dividend ratio | 0.3 | 0.4 | 0.1 | 0.4 | 0.4 | — | |||||||||||||||||
Combined ratio | 112.3 | % | 95.7 | % | (16.6 | ) | pts | 104.8 | % | 96.8 | % | (8.0 | ) | pts | |||||||||
Combined ratio excluding catastrophes and development | 93.4 | % | 94.6 | % | 1.2 | pts | 93.5 | % | 94.8 | % | 1.3 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 301 | $ | 38 | $ | 376 | $ | 96 | |||||||||||||||
Effect on loss & LAE ratio | 17.5 | % | 2.2 | % | (15.3 | ) | pts | 10.9 | % | 2.9 | % | (8.0 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | 25 | $ | (19 | ) | $ | 14 | $ | (28 | ) | |||||||||||||
Effect on loss & LAE ratio | 1.4 | % | (1.1 | ) | % | (2.5 | ) | pts | 0.4 | % | (0.9 | ) | % | (1.3 | ) | pts | |||||||
Rate | 11 | % | 4 | % | 7 | pts | 10 | % | 4 | % | 6 | pts | |||||||||||
Renewal premium change | 9 | % | 6 | % | 3 | pts | 9 | % | 5 | % | 4 | pts | |||||||||||
Retention | 83 | % | 84 | % | (1 | ) | pts | 82 | % | 84 | % | (2 | ) | pts | |||||||||
New business | $ | 363 | $ | 358 | 1 | % | $ | 703 | $ | 687 | 2 | % | |||||||||||
4
Specialty - Results of Operations
Periods ended June 30 | Three Months | Six Months | |||||||||||||||||||||
(In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Gross written premiums | $ | 1,762 | $ | 1,724 | 2 | % | $ | 3,476 | $ | 3,425 | 1 | % | |||||||||||
Gross written premiums ex. 3rd party captives | 811 | 755 | 7 | 1,552 | 1,485 | 5 | |||||||||||||||||
Net written premiums | 742 | 713 | 4 | 1,436 | 1,411 | 2 | |||||||||||||||||
Net earned premiums | 705 | 688 | 2 | 1,390 | 1,349 | 3 | |||||||||||||||||
Net investment income | 133 | 134 | 189 | 289 | |||||||||||||||||||
Non-insurance warranty revenue | 308 | 285 | 609 | 566 | |||||||||||||||||||
Other revenues | — | (1 | ) | 1 | — | ||||||||||||||||||
Total operating revenues | 1,146 | 1,106 | 4 | 2,189 | 2,204 | (1 | ) | ||||||||||||||||
Insurance claims and policyholders' benefits | 509 | 396 | 915 | 789 | |||||||||||||||||||
Amortization of deferred acquisition costs | 153 | 152 | 304 | 299 | |||||||||||||||||||
Non-insurance warranty expense | 285 | 263 | 566 | 523 | |||||||||||||||||||
Other insurance related expenses | 73 | 76 | 142 | 146 | |||||||||||||||||||
Other expenses | 10 | 12 | 23 | 24 | |||||||||||||||||||
Total claims, benefits and expenses | 1,030 | 899 | (15 | ) | 1,950 | 1,781 | (9 | ) | |||||||||||||||
Core income (loss) before income tax | 116 | 207 | 239 | 423 | |||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (26 | ) | (46 | ) | (53 | ) | (93 | ) | |||||||||||||||
Core income (loss) | $ | 90 | $ | 161 | (44 | ) | % | $ | 186 | $ | 330 | (44 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (30 | ) | $ | 64 | (147 | ) | % | $ | 29 | $ | 115 | (75 | ) | % | ||||||||
Loss & LAE ratio | 72.0 | % | 57.4 | % | (14.6 | ) | pts | 65.6 | % | 58.3 | % | (7.3 | ) | pts | |||||||||
Expense ratio | 32.0 | 33.1 | 1.1 | 32.1 | 33.0 | 0.9 | |||||||||||||||||
Dividend ratio | 0.2 | 0.2 | — | 0.2 | 0.2 | — | |||||||||||||||||
Combined ratio | 104.2 | % | 90.7 | % | (13.5 | ) | pts | 97.9 | % | 91.5 | % | (6.4 | ) | pts | |||||||||
Combined ratio excluding catastrophes and development | 92.1 | % | 93.2 | % | 1.1 | pts | 92.0 | % | 93.4 | % | 1.4 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 105 | $ | 1 | $ | 113 | $ | 13 | |||||||||||||||
Effect on loss & LAE ratio | 15.0 | % | 0.1 | % | (14.9 | ) | pts | 8.2 | % | 1.0 | % | (7.2 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (20 | ) | $ | (18 | ) | $ | (31 | ) | $ | (38 | ) | |||||||||||
Effect on loss & LAE ratio | (2.9 | ) | % | (2.6 | ) | % | 0.3 | pts | (2.3 | ) | % | (2.9 | ) | % | (0.6 | ) | pts | ||||||
Rate | 12 | % | 4 | % | 8 | pts | 10 | % | 3 | % | 7 | pts | |||||||||||
Renewal premium change | 11 | % | 5 | % | 6 | pts | 10 | % | 6 | % | 4 | pts | |||||||||||
Retention | 85 | % | 89 | % | (4 | ) | pts | 85 | % | 89 | % | (4 | ) | pts | |||||||||
New business | $ | 96 | $ | 97 | (1 | ) | % | $ | 170 | $ | 182 | (7 | ) | % | |||||||||
5
Commercial - Results of Operations
Periods ended June 30 | Three Months | Six Months | |||||||||||||||||||||
(In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Gross written premiums | $ | 1,126 | $ | 1,024 | 10 | % | $ | 2,188 | $ | 1,965 | 11 | % | |||||||||||
Gross written premiums ex. 3rd party captives | 1,044 | 958 | 9 | 2,103 | 1,891 | 11 | |||||||||||||||||
Net written premiums | 949 | 912 | 4 | 1,899 | 1,761 | 8 | |||||||||||||||||
Net earned premiums | 795 | 763 | 4 | 1,613 | 1,526 | 6 | |||||||||||||||||
Net investment income | 177 | 154 | 224 | 344 | |||||||||||||||||||
Other revenues | 5 | 3 | 12 | 10 | |||||||||||||||||||
Total operating revenues | 977 | 920 | 6 | 1,849 | 1,880 | (2 | ) | ||||||||||||||||
Insurance claims and policyholders' benefits | 671 | 512 | 1,234 | 1,027 | |||||||||||||||||||
Amortization of deferred acquisition costs | 147 | 130 | 291 | 257 | |||||||||||||||||||
Other insurance related expenses | 124 | 119 | 251 | 249 | |||||||||||||||||||
Other expenses | 13 | 7 | 19 | 18 | |||||||||||||||||||
Total claims, benefits and expenses | 955 | 768 | (24 | ) | 1,795 | 1,551 | (16 | ) | |||||||||||||||
Core income (loss) before income tax | 22 | 152 | 54 | 329 | |||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (2 | ) | (32 | ) | (10 | ) | (70 | ) | |||||||||||||||
Core income (loss) | $ | 20 | $ | 120 | (83 | ) | % | $ | 44 | $ | 259 | (83 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (147 | ) | $ | 2 | N/M | % | $ | (163 | ) | $ | (7 | ) | N/M | % | ||||||||
Loss & LAE ratio | 84.0 | % | 66.5 | % | (17.5 | ) | pts | 75.9 | % | 66.7 | % | (9.2 | ) | pts | |||||||||
Expense ratio | 33.9 | 32.6 | (1.3 | ) | 33.6 | 33.2 | (0.4 | ) | |||||||||||||||
Dividend ratio | 0.6 | 0.6 | — | 0.6 | 0.6 | — | |||||||||||||||||
Combined ratio | 118.5 | % | 99.7 | % | (18.8 | ) | pts | 110.1 | % | 100.5 | % | (9.6 | ) | pts | |||||||||
Combined ratio excluding catastrophes and development | 93.5 | % | 94.9 | % | 1.4 | pts | 94.3 | % | 95.7 | % | 1.4 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 151 | $ | 37 | $ | 208 | $ | 77 | |||||||||||||||
Effect on loss & LAE ratio | 19.0 | % | 4.9 | % | (14.1 | ) | pts | 12.8 | % | 5.1 | % | (7.7 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | 48 | $ | — | $ | 48 | $ | (3 | ) | ||||||||||||||
Effect on loss & LAE ratio | 6.0 | % | (0.1 | ) | % | (6.1 | ) | pts | 3.0 | % | (0.3 | ) | % | (3.3 | ) | pts | |||||||
Rate | 9 | % | 3 | % | 6 | pts | 9 | % | 3 | % | 6 | pts | |||||||||||
Renewal premium change | 8 | % | 5 | % | 3 | pts | 8 | % | 5 | % | 3 | pts | |||||||||||
Retention | 83 | % | 87 | % | (4 | ) | pts | 84 | % | 86 | % | (2 | ) | pts | |||||||||
New business | $ | 205 | $ | 186 | 10 | % | $ | 403 | $ | 350 | 15 | % | |||||||||||
6
International - Results of Operations
Periods ended June 30 | Three Months | Six Months | |||||||||||||||||||||
(In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Gross written premiums | $ | 277 | $ | 287 | (3 | ) | % | $ | 584 | $ | 611 | (4 | ) | % | |||||||||
Net written premiums | 239 | 249 | (4 | ) | 458 | 508 | (10 | ) | |||||||||||||||
Net earned premiums | 224 | 243 | (8 | ) | 463 | 493 | (6 | ) | |||||||||||||||
Net investment income | 14 | 15 | 29 | 30 | |||||||||||||||||||
Other revenues | — | 1 | — | 1 | |||||||||||||||||||
Total operating revenues | 238 | 259 | (8 | ) | 492 | 524 | (6 | ) | |||||||||||||||
Insurance claims and policyholders' benefits | 176 | 147 | 330 | 309 | |||||||||||||||||||
Amortization of deferred acquisition costs | 42 | 56 | 91 | 124 | |||||||||||||||||||
Other insurance related expenses | 39 | 34 | 75 | 59 | |||||||||||||||||||
Other expenses | (2 | ) | 3 | 11 | 7 | ||||||||||||||||||
Total claims, benefits and expenses | 255 | 240 | (6 | ) | 507 | 499 | (2 | ) | |||||||||||||||
Core income (loss) before income tax | (17 | ) | 19 | (15 | ) | 25 | |||||||||||||||||
Income tax (expense) benefit on core income (loss) | 3 | (2 | ) | 3 | (2 | ) | |||||||||||||||||
Core income (loss) | $ | (14 | ) | $ | 17 | (182 | ) | % | $ | (12 | ) | $ | 23 | (152 | ) | % | |||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (33 | ) | $ | 6 | N/M | % | $ | (33 | ) | $ | 1 | N/M | % | |||||||||
Loss & LAE ratio | 78.6 | % | 60.2 | % | (18.4 | ) | pts | 71.3 | % | 62.5 | % | (8.8 | ) | pts | |||||||||
Expense ratio | 36.7 | 37.3 | 0.6 | 36.1 | 37.2 | 1.1 | |||||||||||||||||
Dividend ratio | — | — | — | — | — | — | |||||||||||||||||
Combined ratio | 115.3 | % | 97.5 | % | (17.8 | ) | pts | 107.4 | % | 99.7 | % | (7.7 | ) | pts | |||||||||
Combined ratio excluding catastrophes and development | 96.6 | % | 97.4 | % | 0.8 | pts | 96.2 | % | 95.7 | % | (0.5 | ) | pts | ||||||||||
Net accident year catastrophe losses incurred | $ | 45 | $ | — | $ | 55 | $ | 6 | |||||||||||||||
Effect on loss & LAE ratio | 19.9 | % | 0.2 | % | (19.7 | ) | pts | 11.9 | % | 1.3 | % | (10.6 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (3 | ) | $ | (1 | ) | $ | (3 | ) | $ | 13 | ||||||||||||
Effect on loss & LAE ratio | (1.2 | ) | % | (0.1 | ) | % | 1.1 | pts | (0.7 | ) | % | 2.7 | % | 3.4 | pts | ||||||||
Rate | 13 | % | 7 | % | 6 | pts | 11 | % | 6 | % | 5 | pts | |||||||||||
Renewal premium change | 11 | % | 8 | % | 3 | pts | 9 | % | 4 | % | 5 | pts | |||||||||||
Retention | 74 | % | 70 | % | 4 | pts | 72 | % | 69 | % | 3 | pts | |||||||||||
New business | $ | 62 | $ | 75 | (17 | ) | % | $ | 130 | $ | 155 | (16 | ) | % | |||||||||
7
Life & Group - Results of Operations
Periods ended June 30 | Three Months | Six Months | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net earned premiums | $ | 126 | $ | 130 | $ | 253 | $ | 260 | ||||||||
Net investment income | 206 | 205 | 414 | 409 | ||||||||||||
Other revenues | — | — | — | 1 | ||||||||||||
Total operating revenues | 332 | 335 | 667 | 670 | ||||||||||||
Insurance claims and policyholders' benefits | 304 | 309 | 620 | 617 | ||||||||||||
Other insurance related expenses | 25 | 30 | 51 | 58 | ||||||||||||
Other expenses | — | 2 | 3 | 4 | ||||||||||||
Total claims, benefits and expenses | 329 | 341 | 674 | 679 | ||||||||||||
Core income (loss) before income tax | 3 | (6 | ) | (7 | ) | (9 | ) | |||||||||
Income tax (expense) benefit on core income (loss) | 11 | 13 | 25 | 26 | ||||||||||||
Core income (loss) | $ | 14 | $ | 7 | $ | 18 | $ | 17 | ||||||||
8
Corporate & Other - Results of Operations
Periods ended June 30 | Three Months | Six Months | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net earned premiums | $ | — | $ | — | $ | — | $ | (1 | ) | |||||||
Net investment income | 4 | 7 | 7 | 14 | ||||||||||||
Other revenues | — | 1 | — | 1 | ||||||||||||
Total operating revenues | 4 | 8 | 7 | 14 | ||||||||||||
Insurance claims and policyholders' benefits | (18 | ) | (12 | ) | (32 | ) | (33 | ) | ||||||||
Other insurance related expenses | (1 | ) | (1 | ) | (1 | ) | (3 | ) | ||||||||
Other expenses | 34 | 33 | 71 | 70 | ||||||||||||
Total claims, benefits and expenses | 15 | 20 | 38 | 34 | ||||||||||||
Core income (loss) before income tax | (11 | ) | (12 | ) | (31 | ) | (20 | ) | ||||||||
Income tax (expense) benefit on core income (loss) | — | 1 | 2 | 3 | ||||||||||||
Core income (loss) | $ | (11 | ) | $ | (11 | ) | $ | (29 | ) | $ | (17 | ) | ||||
9
Investment Summary - Consolidated
June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 22,808 | $ | 2,537 | $ | 20,749 | $ | 602 | $ | 22,069 | $ | 2,260 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 8,185 | 1,199 | 7,839 | 1,113 | 7,804 | 1,155 | |||||||||||||||||
Taxable | 2,942 | 502 | 2,652 | 421 | 2,848 | 404 | |||||||||||||||||
Total states, municipalities and political subdivisions | 11,127 | 1,701 | 10,491 | 1,534 | 10,652 | 1,559 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 3,784 | 167 | 4,397 | 199 | 4,519 | 132 | |||||||||||||||||
CMBS | 2,116 | (23 | ) | 2,090 | (117 | ) | 2,346 | 81 | |||||||||||||||
Other ABS | 1,959 | 19 | 1,744 | (124 | ) | 1,962 | 37 | ||||||||||||||||
Total asset-backed | 7,859 | 163 | 8,231 | (42 | ) | 8,827 | 250 | ||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 498 | 7 | 155 | 8 | 145 | (1 | ) | ||||||||||||||||
Foreign government | 483 | 26 | 463 | 11 | 504 | 13 | |||||||||||||||||
Redeemable preferred stock | — | — | 9 | — | 10 | — | |||||||||||||||||
Total fixed maturity securities | 42,775 | 4,434 | 40,098 | 2,113 | 42,207 | 4,081 | |||||||||||||||||
Equities: | |||||||||||||||||||||||
Common stock | 154 | — | 191 | — | 142 | — | |||||||||||||||||
Non-redeemable preferred stock | 705 | — | 608 | — | 723 | — | |||||||||||||||||
Total equities | 859 | — | 799 | — | 865 | — | |||||||||||||||||
Limited partnership investments | 1,558 | — | 1,509 | — | 1,752 | — | |||||||||||||||||
Other invested assets | 65 | — | 63 | — | 65 | — | |||||||||||||||||
Mortgage loans | 1,042 | — | 1,021 | — | 994 | — | |||||||||||||||||
Short term investments | 1,458 | 1 | 596 | (2 | ) | 1,861 | — | ||||||||||||||||
Total investments | $ | 47,757 | $ | 4,435 | $ | 44,086 | $ | 2,111 | $ | 47,744 | $ | 4,081 | |||||||||||
Net receivable/(payable) on investment activity | $ | (403 | ) | $ | 136 | $ | 37 | ||||||||||||||||
Effective duration (in years) | 6.0 | 6.0 | 6.0 | ||||||||||||||||||||
Weighted average rating | A | A | A | ||||||||||||||||||||
RMBS - Residential mortgage-backed securities
CMBS - Commercial mortgage-backed securities
Other ABS - Other asset-backed securities
10
Investment Summary - Property & Casualty and Corporate & Other
June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 14,383 | $ | 888 | $ | 13,243 | $ | (203 | ) | $ | 13,925 | $ | 738 | ||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 1,154 | 61 | 683 | 33 | 646 | 37 | |||||||||||||||||
Taxable | 1,030 | 87 | 912 | 74 | 1,077 | 71 | |||||||||||||||||
Total states, municipalities and political subdivisions | 2,184 | 148 | 1,595 | 107 | 1,723 | 108 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 3,702 | 162 | 4,312 | 196 | 4,441 | 128 | |||||||||||||||||
CMBS | 2,028 | (25 | ) | 2,005 | (116 | ) | 2,264 | 77 | |||||||||||||||
Other ABS | 1,783 | 1 | 1,612 | (122 | ) | 1,842 | 29 | ||||||||||||||||
Total asset-backed | 7,513 | 138 | 7,929 | (42 | ) | 8,547 | 234 | ||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 489 | 7 | 145 | 8 | 143 | (1 | ) | ||||||||||||||||
Foreign government | 477 | 25 | 458 | 11 | 498 | 12 | |||||||||||||||||
Redeemable preferred stock | — | — | 4 | — | 5 | — | |||||||||||||||||
Total fixed maturity securities | 25,046 | 1,206 | 23,374 | (119 | ) | 24,841 | 1,091 | ||||||||||||||||
Equities: | |||||||||||||||||||||||
Common stock | 154 | — | 191 | — | 142 | — | |||||||||||||||||
Non-redeemable preferred stock | 168 | — | 156 | — | 181 | — | |||||||||||||||||
Total equities | 322 | — | 347 | — | 323 | — | |||||||||||||||||
Limited partnership investments | 1,558 | — | 1,509 | — | 1,752 | — | |||||||||||||||||
Other invested assets | 65 | — | 63 | — | 65 | — | |||||||||||||||||
Mortgage loans | 761 | — | 749 | — | 715 | — | |||||||||||||||||
Short term investments | 1,397 | 1 | 583 | (2 | ) | 1,774 | — | ||||||||||||||||
Total investments | $ | 29,149 | $ | 1,207 | $ | 26,625 | $ | (121 | ) | $ | 29,470 | $ | 1,091 | ||||||||||
Net receivable/(payable) on investment activity | $ | (446 | ) | $ | 124 | $ | 17 | ||||||||||||||||
Effective duration (in years) | 4.1 | 4.1 | 4.1 | ||||||||||||||||||||
Weighted average rating | A | A- | A- | ||||||||||||||||||||
11
Investment Summary - Life & Group
June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 8,425 | $ | 1,649 | $ | 7,506 | $ | 805 | $ | 8,144 | $ | 1,522 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 7,031 | 1,138 | 7,156 | 1,080 | 7,158 | 1,118 | |||||||||||||||||
Taxable | 1,912 | 415 | 1,740 | 347 | 1,771 | 333 | |||||||||||||||||
Total states, municipalities and political subdivisions | 8,943 | 1,553 | 8,896 | 1,427 | 8,929 | 1,451 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 82 | 5 | 85 | 3 | 78 | 4 | |||||||||||||||||
CMBS | 88 | 2 | 85 | (1 | ) | 82 | 4 | ||||||||||||||||
Other ABS | 176 | 18 | 132 | (2 | ) | 120 | 8 | ||||||||||||||||
Total asset-backed | 346 | 25 | 302 | — | 280 | 16 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 9 | — | 10 | — | 2 | — | |||||||||||||||||
Foreign government | 6 | 1 | 5 | — | 6 | 1 | |||||||||||||||||
Redeemable preferred stock | — | — | 5 | — | 5 | — | |||||||||||||||||
Total fixed maturity securities | 17,729 | 3,228 | 16,724 | 2,232 | 17,366 | 2,990 | |||||||||||||||||
Equities: | |||||||||||||||||||||||
Common stock | — | — | — | — | — | — | |||||||||||||||||
Non-redeemable preferred stock | 537 | — | 452 | — | 542 | — | |||||||||||||||||
Total equities | 537 | — | 452 | — | 542 | — | |||||||||||||||||
Limited partnership investments | — | — | — | — | — | — | |||||||||||||||||
Other invested assets | — | — | — | — | — | — | |||||||||||||||||
Mortgage loans | 281 | — | 272 | — | 279 | — | |||||||||||||||||
Short term investments | 61 | — | 13 | — | 87 | — | |||||||||||||||||
Total investments | $ | 18,608 | $ | 3,228 | $ | 17,461 | $ | 2,232 | $ | 18,274 | $ | 2,990 | |||||||||||
Net receivable/(payable) on investment activity | $ | 43 | $ | 12 | $ | 20 | |||||||||||||||||
Effective duration (in years) | 8.8 | 8.7 | 8.9 | ||||||||||||||||||||
Weighted average rating | A | A | A | ||||||||||||||||||||
12
Investments - Fixed Maturity Securities by Credit Rating
June 30, 2020 | U.S. Government, Government agencies and Government-sponsored enterprises | AAA | AA | A | BBB | Non-investment grade | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | |||||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | — | $ | — | $ | 49 | $ | 2 | $ | 485 | $ | 55 | $ | 5,135 | $ | 779 | $ | 15,267 | $ | 1,740 | $ | 1,872 | $ | (39 | ) | $ | 22,808 | $ | 2,537 | ||||||||||||||||||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax-exempt | — | — | 2,508 | 377 | 3,516 | 532 | 1,910 | 261 | 235 | 29 | 16 | — | 8,185 | 1,199 | |||||||||||||||||||||||||||||||||||||||||
Taxable | — | — | 530 | 39 | 1,609 | 284 | 769 | 177 | 34 | 1 | — | 1 | 2,942 | 502 | |||||||||||||||||||||||||||||||||||||||||
Total states, municipalities and political subdivisions | — | — | 3,038 | 416 | 5,125 | 816 | 2,679 | 438 | 269 | 30 | 16 | 1 | 11,127 | 1,701 | |||||||||||||||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RMBS | 3,472 | 142 | 6 | — | 24 | 1 | 36 | 1 | 12 | 1 | 234 | 22 | 3,784 | 167 | |||||||||||||||||||||||||||||||||||||||||
CMBS | 27 | — | 328 | 21 | 741 | 32 | 278 | (11 | ) | 541 | (41 | ) | 201 | (24 | ) | 2,116 | (23 | ) | |||||||||||||||||||||||||||||||||||||
Other ABS | — | — | 43 | (1 | ) | 106 | 3 | 1,045 | 5 | 750 | 10 | 15 | 2 | 1,959 | 19 | ||||||||||||||||||||||||||||||||||||||||
Total asset-backed | 3,499 | 142 | 377 | 20 | 871 | 36 | 1,359 | (5 | ) | 1,303 | (30 | ) | 450 | — | 7,859 | 163 | |||||||||||||||||||||||||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 498 | 7 | — | — | — | — | — | — | — | — | — | — | 498 | 7 | |||||||||||||||||||||||||||||||||||||||||
Foreign government | — | — | 135 | 5 | 236 | 13 | 84 | 6 | 28 | 2 | — | — | 483 | 26 | |||||||||||||||||||||||||||||||||||||||||
Redeemable preferred stock | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | 3,997 | $ | 149 | $ | 3,599 | $ | 443 | $ | 6,717 | $ | 920 | $ | 9,257 | $ | 1,218 | $ | 16,867 | $ | 1,742 | $ | 2,338 | $ | (38 | ) | $ | 42,775 | $ | 4,434 | ||||||||||||||||||||||||||
Percentage of total fixed maturity securities | 9 | % | 8 | % | 16 | % | 22 | % | 40 | % | 5 | % | 100 | % | |||||||||||||||||||||||||||||||||||||||||
13
Components of Net Investment Income
Consolidated | ||||||||||||||||
Periods ended June 30 | Three Months | Six Months | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Taxable fixed income securities | $ | 360 | $ | 385 | $ | 731 | $ | 768 | ||||||||
Tax-exempt fixed income securities | 80 | 80 | 158 | 162 | ||||||||||||
Total fixed income securities | 440 | 465 | 889 | 930 | ||||||||||||
Limited partnership and common stock investments | 84 | 43 | (41 | ) | 139 | |||||||||||
Other, net of investment expense | 10 | 7 | 15 | 17 | ||||||||||||
Pretax net investment income | $ | 534 | $ | 515 | $ | 863 | $ | 1,086 | ||||||||
Fixed income securities, after tax | $ | 361 | $ | 382 | $ | 728 | $ | 762 | ||||||||
Net investment income, after tax | 436 | 420 | 709 | 885 | ||||||||||||
Effective income yield for fixed income securities, pretax | 4.6 | % | 4.8 | % | 4.6 | % | 4.8 | % | ||||||||
Effective income yield for fixed income securities, after tax | 3.8 | 3.9 | 3.8 | 3.9 | ||||||||||||
Limited partnership and common stock return | 5.0 | 2.1 | (2.3 | ) | 6.8 | |||||||||||
Property & Casualty and Corporate & Other | ||||||||||||||||
Periods ended June 30 | Three Months | Six Months | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Taxable fixed income securities | $ | 225 | $ | 254 | $ | 459 | $ | 507 | ||||||||
Tax-exempt fixed income securities | 8 | 5 | 13 | 11 | ||||||||||||
Total fixed income securities | 233 | 259 | 472 | 518 | ||||||||||||
Limited partnership and common stock investments | 84 | 43 | (41 | ) | 139 | |||||||||||
Other, net of investment expense | 11 | 8 | 18 | 20 | ||||||||||||
Pretax net investment income | $ | 328 | $ | 310 | $ | 449 | $ | 677 | ||||||||
Fixed income securities, after tax | $ | 187 | $ | 206 | $ | 376 | $ | 411 | ||||||||
Net investment income, after tax | 261 | 246 | 358 | 537 | ||||||||||||
Effective income yield for fixed income securities, pretax | 4.0 | % | 4.3 | % | 4.0 | % | 4.3 | % | ||||||||
Effective income yield for fixed income securities, after tax | 3.2 | 3.5 | 3.2 | 3.4 | ||||||||||||
Life & Group | ||||||||||||||||
Periods ended June 30 | Three Months | Six Months | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Taxable fixed income securities | $ | 135 | $ | 131 | $ | 272 | $ | 261 | ||||||||
Tax-exempt fixed income securities | 72 | 75 | 145 | 151 | ||||||||||||
Total fixed income securities | 207 | 206 | 417 | 412 | ||||||||||||
Limited partnership and common stock investments | — | — | — | — | ||||||||||||
Other, net of investment expense | (1 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||
Pretax net investment income | $ | 206 | $ | 205 | $ | 414 | $ | 409 | ||||||||
Fixed income securities, after tax | $ | 174 | $ | 176 | $ | 352 | $ | 351 | ||||||||
Net investment income, after tax | 175 | 174 | 351 | 348 | ||||||||||||
Effective income yield for fixed income securities, pretax | 5.5 | % | 5.6 | % | 5.6 | % | 5.6 | % | ||||||||
Effective income yield for fixed income securities, after tax | 4.7 | 4.8 | 4.7 | 4.8 | ||||||||||||
14
Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended June 30, 2020 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group | Corporate & Other | Total Operations | ||||||||||||||||||||
Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
Gross | $ | 5,472 | $ | 8,704 | $ | 1,818 | $ | 15,994 | $ | 3,712 | $ | 2,166 | $ | 21,872 | |||||||||||||
Ceded | 777 | 813 | 235 | 1,825 | 146 | 1,996 | 3,967 | ||||||||||||||||||||
Net | 4,695 | 7,891 | 1,583 | 14,169 | 3,566 | 170 | 17,905 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 508 | 666 | 176 | 1,350 | 267 | 1 | 1,618 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (384 | ) | (540 | ) | (126 | ) | (1,050 | ) | (254 | ) | (4 | ) | (1,308 | ) | |||||||||||||
Foreign currency translation adjustment and other | — | 2 | 21 | 23 | 30 | — | 53 | ||||||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 4,819 | 8,019 | 1,654 | 14,492 | 3,609 | 167 | 18,268 | ||||||||||||||||||||
Ceded | 877 | 811 | 252 | 1,940 | 142 | 1,920 | 4,002 | ||||||||||||||||||||
Gross | $ | 5,696 | $ | 8,830 | $ | 1,906 | $ | 16,432 | $ | 3,751 | $ | 2,087 | $ | 22,270 | |||||||||||||
Six months ended June 30, 2020 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group | Corporate & Other | Total Operations | ||||||||||||||||||||
Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
Gross | $ | 5,238 | $ | 8,656 | $ | 1,876 | $ | 15,770 | $ | 3,716 | $ | 2,234 | $ | 21,720 | |||||||||||||
Ceded | 562 | 807 | 248 | 1,617 | 159 | 2,059 | 3,835 | ||||||||||||||||||||
Net | 4,676 | 7,849 | 1,628 | 14,153 | 3,557 | 175 | 17,885 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 913 | 1,224 | 330 | 2,467 | 547 | 2 | 3,016 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (771 | ) | (1,055 | ) | (258 | ) | (2,084 | ) | (505 | ) | (9 | ) | (2,598 | ) | |||||||||||||
Foreign currency translation adjustment and other | 1 | 1 | (46 | ) | (44 | ) | 10 | (1 | ) | (35 | ) | ||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 4,819 | 8,019 | 1,654 | 14,492 | 3,609 | 167 | 18,268 | ||||||||||||||||||||
Ceded | 877 | 811 | 252 | 1,940 | 142 | 1,920 | 4,002 | ||||||||||||||||||||
Gross | $ | 5,696 | $ | 8,830 | $ | 1,906 | $ | 16,432 | $ | 3,751 | $ | 2,087 | $ | 22,270 | |||||||||||||
15
Life & Group Policyholder Reserves
June 30, 2020 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,914 | $ | 9,543 | $ | 12,457 | |||||
Structured settlement annuities | 506 | — | 506 | ||||||||
Other | 13 | — | 13 | ||||||||
Total | 3,433 | 9,543 | 12,976 | ||||||||
Shadow adjustments | 176 | 2,789 | 2,965 | ||||||||
Ceded reserves | 142 | 264 | 406 | ||||||||
Total gross reserves | $ | 3,751 | $ | 12,596 | $ | 16,347 | |||||
December 31, 2019 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,863 | $ | 9,470 | $ | 12,333 | |||||
Structured settlement annuities | 515 | — | 515 | ||||||||
Other | 12 | — | 12 | ||||||||
Total | 3,390 | 9,470 | 12,860 | ||||||||
Shadow adjustments | 167 | 2,615 | 2,782 | ||||||||
Ceded reserves | 159 | 226 | 385 | ||||||||
Total gross reserves | $ | 3,716 | $ | 12,311 | $ | 16,027 | |||||
16
Definitions and Presentation
• | Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company. |
• | P&C Operations includes Specialty, Commercial and International. |
• | Life & Group segment primarily includes the results of long term care businesses that are in run-off. |
• | Corporate & Other segment 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. Intersegment eliminations are also included in this segment. |
• | Management uses the core income (loss) financial measure to monitor the Company’s operations. Please refer to Note I to the Consolidated Financial Statements within the December 31, 2019 Form 10-K for further discussion of this non-GAAP financial measure. |
• | Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses. |
• | In the evaluation of the results of Specialty, Commercial and International, management uses the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition, management also utilizes renewal premium change, rate, retention and new business in evaluating operating trends. 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. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Rate, renewal premium change and retention presented for the prior year is updated to reflect subsequent activity on policies written in the period. New business represents premiums from policies written with new customers and additional policies written with existing customers. |
• | This financial supplement may also reference or contain financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Core income, which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk. |
17
• | Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent 10-K on file with the Securities and Exchange Commission, as well as the press release, available at www.cna.com. |
• | Gross written premiums ex. 3rd party captives represents gross written premiums excluding business which is mostly ceded to third party captives, including business related to large warranty programs. |
• | Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts. |
• | Net investment income from fixed income securities, as presented, includes both fixed maturity securities and non-redeemable preferred stock. |
• | Certain immaterial differences are due to rounding. |
• | N/M = Not Meaningful |
18