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CNA Financial posts net income of US$343 million in 2016 Q3


November 1, 2016   by Canadian Underwriter


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CNA Financial Corporation saw net income jump US$165 million to US$343 million in 2016 Q3 over the prior-year quarter, driven by the performance of its Property & Casualty Operations, higher net investment income and stable catastrophe losses.

Net income for the third quarter of 2016 was US$343 million compared to US$178 million in the same quarter of 2015, notes a company statement Monday.

For the nine months ending Sept. 30, 2016, CNA Financial posted net income of US$618 million compared to US$549 million for the corresponding period in 2015.

Net operating income also increased, the company reports, reaching US$311 million in 2016 Q3 compared to US$210 million in 2015 Q3. Year to date, net operating income was US$603 million in 2016 compared to US$567 million in 2015.

CNA Financial’s P&C Operations contributed to the solid returns, posting a net operating income of US$329 million in the third quarter of 2016 compared to US$263 million in the same quarter of 2015.

This was “driven by higher net investment income, reflecting improved limited partnership returns,” the statement notes. In addition, catastrophe losses in 2016 Q3 – primarily from weather-related events in the United States – were US$11 million, after tax, as compared with US$10 million, after tax, in the prior year quarter.

P&C Operations’ net income also increased to US$349 million in 2016 Q3 compared to US$228 million in 2015 Q3.

And the combined ratio, for its part, was 90.4% in the third quarter of 2016 compared to 85.7% in the same quarter of 2015, while the combined ratio, excluding catastrophes and development, was 97.5% compared to 95.5%.

“CNA had a strong quarter highlighted by a P&C combined ratio of 90.4%, reflecting our steady underwriting performance and continued favorable reserve development,” says Thomas Motamed, chairman and CEO of CNA Financial Corporation.

“Our disciplined actions have sustained an underlying loss ratio (54.7% compared to 52.1%) in line with where we ended 2015, despite challenging market conditions,” Motamed adds in the company statement.

The net written premiums (NWP) P&C Operations were US$1,624 million for the third quarter of 2016 compared to US$1,529 million for the prior-year quarter. Year to date, NWP was US$4,917 million in 2016, up from US$4,836 million in 2015.

Looking at P&C results by business operation, the results show the following:

  • Specialty posted NWP of US$733 million in 2016 Q3 (compared to US$707 million in 2015 Q3), net income of US$201 million (US$165 million), net operating income of US$195 million (US$179 million), a combined ratio of 79.9% (74.4%) and a combined ratio, excluding Cats and development, of 95.6% (92.5%).

“The loss ratio increased 3.3 points due to lower favourable net prior year reserve development and a higher non-catastrophe current accident year loss ratio,” the statement notes.

“The expense ratio increased 1.7 points as compared with the prior-year quarter. About half of this increase was due to non-recurring underwriting expenses related to the transition to a new service provider for our information technology infrastructure and employee termination costs resulting from an organizational review,” it adds.

  • Commercial posted NWP of US$684 million in 2016 Q3 (compared to US$642 million in 2015 Q3), net income of US$123 million (US$54 million), net operating income of US$114 million (US$75 million), a combined ratio of 99.8% (95.8%) and a combined ratio, excluding Cats and development, of 98.7% (95.6%).

“The loss ratio increased 1.6 points due to an increase in the current accident year loss ratio and lower favourable net prior year development,” the company notes, adding that Cat losses “were US$12 million, or 1.6 points of the loss ratio, as compared to US$10 million, or 1.4 points of the loss ratio for the prior-year quarter.”

In addition, NWP “increased US$42 million as compared with the prior-year quarter, driven by higher retention and new business in middle markets.”

  • International posted NWP of US$207 million in 2016 Q3 (compared to US$180 million in 2015 Q3), net income of US$25 million (US$9 million), net operating income of US$20 million (US$9 million), a combined ratio of 93.2% (90.4%) and a combined ratio, excluding Cats and development, of 99.7% (106%).

“Excluding the effect of foreign currency exchange rates and the timing of reinsurance spend, NWP for the third quarter of 2016 increased 15%,” the company statement notes.

“The majority of the growth came from middle market products in the United Kingdom and Continental Europe, and from product lines which are now being delivered across all the international platforms, such as healthcare and technology,” the statement adds.

CNA Financial’s third quarter results were also advanced by net investment income. After tax, this was US$371 million in the third quarter of 2016 compared to US$265 million in the third quarter of 2015.

“The increase was driven by limited partnerships, which returned 2.6% as compared with (3.2)% in the prior year period,” the company notes.

Related: P&C combined ratio improves one point to 97.4% for CNA Financial, net income at US$209 million for Q2 2016