CNA Financial Announces 1st Quarter 2002 Results.Business Editors CHICAGO--(BUSINESS WIRE)--May 9, 2002 CNA Financial CNA Financial Corporation (NYSE: CNA) is a financial corporation based in Chicago, Illinois, United States, and noted for its 600 foot tall red headquarters building there. Its principal subsidiary, Continental Casualty Company (CCC) was founded in 1897. Corporation (NYSE NYSE See: New York Stock Exchange : CNA (Certified NetWare Administrator) See Novell certification. ) today reported first quarter 2002 net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $111 million, or $0.50 per share, compared with $119 million, or $0.65 per share, reported in the first quarter 2001. Net income was $78 million, or $0.35 per share, in the first quarter of 2002 compared with $295 million, or $1.61 per share, for the same quarter in 2001. The first quarter of 2001 benefited from higher investment yields, limited partnership income and net corporate reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoveries compared to the current quarter. On the other hand, catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses are lower than this time last year. "The underlying performance of the property-casualty business units showed quarter-to-quarter improvement, apart from the impact of lower investment income and corporate covers," said Bernard Ber·nard , Claude 1813-1878. French physiologist noted for his study of the digestive and nervous systems. L. Hengesbaugh, Chairman and Chief Executive Officer of the CNA insurance companies. "In our primary property & casualty business, the gross accident year combined ratio improved eight points to 104% in the first quarter of 2002, driven in large part by rate increases in the mid 20% range. Similar trends were also evident in reinsurance. On business written by our continuing U.S. operation, CNA Re showed an underlying accident year combined ratio of 99%, down substantially from a year ago." "On the life side, quarter-to-quarter comparisons were affected by unfavorable mortality experience in 2002 and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. performance of one of our investment products in the first quarter of 2001. However, life and long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. sales are ahead of last year, and we are building on this momentum with a series of new product introductions. In our group business, net earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. grew 15%. Net operating income was $17 million, up 19% from first quarter last year." In addition, during the first quarter 2002, CNA completed the sale of CNA Vida, its Chilean-based life insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. . CNA Vida's first quarter net operating income of $2 million and a realized loss Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. on the sale of $37 million are reported as loss from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. .
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Results for the Quarter Ended March 31
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Per Share Results
Net Income Components Available to
($ millions) Common Stockholders
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2002 2001 2002 2001
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Net operating income(1) $ 111 $ 119 $ 0.50 $ 0.65
Net realized
investment gains 2 237 0.01 1.30
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Income from continuing
operations 113 356 0.51 1.95
Loss from discontinued
operations(2) (35) -- (0.16) --
Accounting change(3) -- (61) -- (0.34)
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Net income $ 78 $ 295 $ 0.35 $ 1.61
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(1) - Net operating income excludes net realized investment gains,
income or loss from discontinued operations and the cumulative effect
of changes in accounting principle.
(2) - The results of CNA Vida have been recorded as discontinued
operations in accordance with SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets.
(3) - Adoption of SFAS 133, which is a change in accounting for
derivative instruments and hedges.
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Net Operating Income (Loss) by Segment
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Quarter Ended March 31
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($ millions) 2002 2001
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Standard Lines $ 9 $ 65
Specialty Lines 35 43
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Total Property-Casualty Operations 44 108
CNA Re 41 18
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Total Property-Casualty Segments 85 126
Group Operations 17 15
Life Operations 35 42
Corporate and Other (26) (64)
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Net operating income $ 111 $ 119
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Property-Casualty Net Written Premiums
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Quarter Ended March 31
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($ millions) 2002 2001
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Standard Lines $ 1,077 $ 895
Specialty Lines 546 417
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Total Property-Casualty Operations 1,623 1,312
CNA Re 167 201
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Total Property-Casualty Segments $ 1,790 $ 1,513
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Group and Life Operations Net Earned Premiums
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Quarter Ended March 31
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($ millions) 2002 2001
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Group Operations $ 938 $ 818
Life Operations 240 215
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Property-Casualty Ratios
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Combined Ratio Loss & LAE Ratio
Quarter ended March 31 Quarter ended March 31
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2002 2001 2002 2001
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Standard Lines 110.7% 109.7% 77.2% 73.2%
Specialty Lines 104.0 106.3 71.3 68.9
Total Property-Casualty
Operations 108.5 108.5 75.2 71.7
CNA Re 81.7 114.3 41.3 75.1
Total Property-Casualty
Segments 106.2 109.1 72.4 72.1
Total including Corporate 107.5% 111.2% 78.4% 78.9%
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Business Operating Highlights Standard Lines includes standard property and casualty coverages sold to small and middle market commercial businesses primarily through an independent agency distribution system, excess and surplus lines, as well as insurance and risk management products sold to large corporations. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. Specialty Lines provides a broad array of professional, financial and specialty U.S. and international property-casualty products and services. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. CNA Re operates globally as a reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. in the broker market for treaty products and in the direct market for facultative facultative /fac·ul·ta·tive/ (fak´ul-ta?tiv) not obligatory; pertaining to the ability to adjust to particular circumstances or to assume a particular role. fac·ul·ta·tive adj. 1. products. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. Group Operations provides a broad array of group, life and health insurance products and services. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. Life Operations provides financial protection to individuals through a full product line of term life insurance, universal life insurance, long-term care insurance, annuities and other products. Life Operations also provides retirement services products to institutions in the form of various investment products and administration services. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. Corporate and Other segment contains certain corporate level expenses such as interest on corporate debt and losses and expenses related to the centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. adjusting and settlement of asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. , environmental pollution and mass tort A mass tort is a civil action involving numerous plaintiffs against one or a few corporate defendants in state or federal court. As the name implies a mass tort includes many plaintiffs and law firms have used the mass media to reach possible plaintiffs. (APMT APMT Apartment APMT Association of Professional Music Therapists APMT Associate Program Manager for Test APMT Asia-Pacific Mobile Telecommunications Satellite, Pte Ltd (China) APMT Antenna Pattern Measurement Test APMT Advanced Point Mensuration Tool ) claims. In addition, this segment includes the results of certain run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → insurance operations. -- Net operating results improved $38 million for the first quarter of 2002 as compared with the same period in 2001. -- No APMT development was incurred in the first quarter of 2002, compared with $16 million after-tax of adverse development incurred in the first quarter of 2001. -- Lower e-Business expenses and reduced interest expense on corporate debt also contributed to the improved results. Investment Highlights Net investment income decreased $81 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern to $426 million pretax for the first quarter of 2002 as compared with the same period in 2001. Income from limited partnerships decreased $29 million pretax to $7 million pretax primarily due to adverse results from a limited partnership. Additionally, net investment income decreased due to lower portfolio investment yields and increased interest costs on funds withheld and other deposits primarily due to the losses ceded during 2001 under reinsurance treaties Reinsurance Treaty (June 18, 1887) Secret agreement between Germany and Russia. Arranged by Otto von Bismarck after the collapse of the Three Emperors' League, it provided that each party would remain neutral if either became involved in a war with a third nation, and that . As part of the Company's total return investment management approach, the portfolio is actively managed relative to the underlying liabilities to maximize after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. investment returns. In managing its fixed income securities, the Company may accept lower future interest income in exchange for anticipated higher total investment returns after consideration of realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. . The Company views these gains as an acceleration of future expected interest income. Accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) do not allow any portion of realized gains or losses to be considered interest income. For internal purposes, the Company prepares a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net operating income (NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics ) statement that offsets forgone interest income by amortizing realized gains and losses. The amortization occurs over a period representative of the effective duration of the fixed income segment of the portfolio at the time the gain or loss was realized. Additionally, the Company also adjusts its pro forma consolidated NOI by the investment returns from general account limited partnership investments (limited partnerships). These investment returns are recognized on an immediate basis. The table below presents the pro forma effect on NOI and net income from the Company's adjustments.
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Pro Forma Effect on Net Operating Income and Net Income
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Quarter Ended March 31
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($ millions) 2002 2001
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Net operating income $ 111 $ 119
After-tax pro forma investment income adjustment
- fixed income securities 23 20
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Pro forma net operating income - adjusted 134 139
Pro forma net realized (losses) gains,
net of adjustments (5) 92
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Pro forma net income from continuing operations
- adjusted(1) $ 129 $ 231
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(1) Pro forma net income excludes the cumulative effect of a change in accounting principle related to the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 133. About the Company CNA is a leading insurance organization offering a broad range of insurance products and insurance-related services in the property and casualty, life, group and reinsurance markets. Visit CNA at www.cna.com. CNA is a registered service mark, trade name and domain name of CNA Financial Corporation. Conference Call and Webcast Information: A conference call for investors and the professional investment community will be held from 10:00 a.m. to 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy today. On the conference call will be Bernard L. Hengesbaugh, Chairman and Chief Executive Officer of the CNA insurance companies, and other members of senior management. Participants can access the call by dialing 800-289-0436 or for international callers 913-981-5507. It will also be broadcast live on the internet at http://investors.cna.com or you may go to the investor relations Investor relations The process by which the corporation communicates with its investors. pages of the CNA Website (www.cna.com) for further details. The call is available to the media, but questions will be restricted to investors and the professional investment community. A taped replay of the call will be available at 11:00 a.m. EST today until 11:59 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on May 18, 2002 by dialing 888-203-1112 and using passcode 438756 or for international callers 719-457-0820 and using passcode 438756. It will also be archived later in the day for replay on our Website until the date of the next conference call. Financial supplement information related to the first quarter results is available on the investor relations' pages of the CNA Website or by contacting Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. P. Lofe, Jr. at 312-822-3993. FORWARD LOOKING STATEMENT The statements contained in this press release, which are not historical facts, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . When included in this press release, the words "believes," "expects," "intends," "anticipates," "estimates," and analogous analogous /anal·o·gous/ (ah-nal´ah-gus) resembling or similar in some respects, as in function or appearance, but not in origin or development. a·nal·o·gous adj. expressions are intended to identify forward-looking statements. Forward looking statements include expected losses in the insurance business of CNA (the "Company"), including losses for asbestos, environmental pollution and mass tort claims; the Company's expectations concerning its revenues, earnings, expenses and investment activities; expected cost savings and other results from the Company's restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities; expected proceeds and terms of, and other matters concerning, the Company's anticipated disposition of its U.K.-based reinsurance business; and the Company's proposed actions in response to trends in its business. Such statements, and the financial condition and results of operations of the Company and the price of the Company's common stock, are subject to a variety of inherent risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others: general economic and business conditions; changes in financial markets such as fluctuations in interest rates, credit conditions and currency, commodity and stock prices; the effects of the Enron Enron A U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most on energy and capital markets, and on the markets for directors & officers and errors & omissions coverages; changes in foreign or domestic political, social and economic conditions, including the possible occurrence of terrorist attacks; regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. initiatives and compliance with governmental regulations, judicial decisions and rulings; regulatory limitations and restrictions upon the Company and its insurance subsidiaries; the impact of competitive products, policies and pricing and the competitive environment in which the Company operates; product and policy availability and demand and market responses, including the effect of the absence of applicable terrorism legislation on coverages; development of claims and the impact on loss reserves; the performance of reinsurance companies under reinsurance contracts with the Company; results of financing efforts; changes in the Company's composition of operation segments; exposure to liabilities due to claims made by insured and others relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc asbestos remediation and health-based asbestos impairments, and exposure to liabilities for environmental pollution and other mass tort claims; the sufficiency of the Company's loss reserves and the possibility of future increases in reserves; the possibility of changes in the Company's ratings by ratings agencies and changes in rating agency policies and practices; the actual closing of contemplated transactions and agreements; and various other matters and risks (many of which are beyond the Company's control) detailed in the Company's Securities and Exchange Commission filings. These forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statement contained in this press release to reflect any change in the Company's expectations with regard thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. or any change in events, conditions or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or on which any statement is based. |
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