CNA Financial Announces 1st Quarter Results.CHICAGO Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- 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 announced first quarter of 2005 results, which included the following items: --Net income for the first quarter of 2005 of $178 million as compared to net loss of $124 million for the same period in 2004. --Income before net realized investment losses for the first quarter of 2005 of $192 million as compared to $209 million for the same period in 2004. --Property and Casualty combined ratio of 99.0%. --CNA will restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its financial results for prior years to correct its accounting for several 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. contracts, primarily with a former affiliate, and its equity accounting for that affiliate. The Company will file a Form 10-K/A for 2004 reflecting the effects of the restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. , which will reduce stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. as of December December: see month. 31, 2004 by $29 million, or 0.3%. The revised accounting increased net income for the three months ended March 31, 2005 by $2 million and increased earnings per share by $0.01.
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Results for the
Three Months Ended
March 31
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($ millions, except per share data) 2005 2004
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(Restated)
Income before net realized investment losses $192 $209
Net realized investment losses (14) (333)
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Net income (loss) $178 $(124)
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Net income (loss) per share results available to
common stockholders (a)(b) $0.63 $(0.55)
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(a) Included in the weighted average number of common shares are the
effects of additional common stock issued related to the November
of 2003 sale of $750 million of convertible preferred shares to
Loews Corporation. The effect of the preferred shares has been
included in the weighted average shares since issuance. The
preferred shares converted into 32,327,015 shares of CNA common
stock on April 20, 2004.
(b) The three months ended March 31, 2005 and 2004 per share results
available to common stockholders are reduced by $17 million and
$16 million, or $0.07 per share and $0.06 per share, of undeclared
preferred stock dividends.
Net income for the three months ended March 31, 2005 increased $302 million as compared with the same period in 2004, primarily due to improved net realized investment results. First quarter of 2004 net results included an 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. impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. loss of $406 million related to the sale of CNA's individual life business. Also favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacting the first quarter of 2005 net results were decreased provisions for insurance and reinsurance bad debt of $32 million after-tax and improved operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . These improvements were offset by increased unfavorable net prior year development of $45 million after-tax and reduced investment income. The Property and Casualty Operations produced a combined ratio of 99.0% in the first quarter of 2005. "In the first quarter of 2005, CNA continued the controlled orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. execution that marked our performance last year" said Steve v. t. 1. To pack or stow, as cargo in a ship's hold. See Steeve. Lilienthal Lilienthal may refer to:
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discipline in an environment of moderating pricing. Property & Casualty Operations has now recorded six consecutive quarters of combined ratios under 100% before the impact of catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses in the third quarter of 2004. Meanwhile, our runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. operations continue to perform as expected." Net realized investment losses were $14 million for the three months ended March 31, 2005 as compared with net realized investment losses of $333 million for the same period in 2004. The improvement was primarily due to the impairment loss recorded in 2004 described above. This was partly offset by decreased results in the first quarter of 2005 from the fixed maturity securities portfolio and a $9 million after-tax impairment loss related to loans made under a credit facility to a national contractor.
Segment Results for the Three Months Ended March 31, 2005
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Corporate
Standard Specialty Total P&C Life & Group & Other
($ millions) Lines Lines Ops. Non-Core Non-Core Total
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Income (loss)
before net
realized
investment
gains
(losses) $101 $79 $180 $1 $11 $192
Net realized
investment
gains
(losses) (8) 3 (5) (3) (6) (14)
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Net income
(loss) $93 $82 $175 $(2) $5 $178
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Segment Results for the Three Months Ended March 31, 2004
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Corporate
Standard Specialty Total P&C Life & Group & Other
($ millions) Lines Lines Ops. Non-Core Non-Core Total
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Income before
net realized
investment
gains
(losses) $114 $75 $189 $19 $1 $209
Net realized
investment
gains
(losses) 38 13 51 (401) 17 (333)
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Net income
(loss) $152 $88 $240 $(382) $18 $(124)
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Property & Casualty Operations Gross Written Premiums
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Three months ended March 31
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($ millions) 2005 2004
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Standard Lines $1,516 $1,565
Specialty Lines 769 710
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Total P&C Operations $2,285 $2,275
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Property & Casualty Operations Net Written Premiums
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Three months ended March 31
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($ millions) 2005 2004
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Standard Lines $1,171 $1,265
Specialty Lines 594 581
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Total P&C Operations $1,765 $1,846
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Property & Casualty Calendar Year Loss Ratios
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Three months ended March 31
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2005 2004
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Standard Lines 71.0% 65.5%
Specialty Lines 62.3 63.1
Total P&C Operations 68.1 64.8
Total P&C Companies (a) 74.6% 71.3%
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(a) P&C Companies includes Standard Lines, Specialty Lines and P&C
business written in Life and Group Non-Core and Corporate and
Other Non-Core, including CNA Re and asbestos, environmental
pollution and mass tort exposures.
Property & Casualty Calendar Year Combined Ratios
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Three months ended March 31
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2005 2004
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Standard Lines 103.7% 99.7%
Specialty Lines 89.4 89.9
Total P&C Operations 99.0 96.8
Total P&C Companies (a) 106.4% 103.6%
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(a) P&C Companies includes Standard Lines, Specialty Lines and P&C
business written in Life and Group Non-Core and Corporate and
Other Non-Core, including CNA Re and asbestos, environmental
pollution and mass tort exposures.
Property & Casualty Gross Accident Year Loss Ratios
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Accident year 2005 Accident year 2004 Accident year 2004
evaluated at evaluated at evaluated at
March 31, 2005 December 31, 2004 March 31, 2005
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Standard Lines 63.0% 67.2% 65.5%
Specialty
Lines 59.9 64.1 59.6
Total P&C
Operations 62.0% 66.3% 63.7%
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Property & Casualty Net Accident Year Loss Ratios
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Accident year 2005 Accident year 2004 Accident year 2004
evaluated at evaluated at evaluated at
March 31, 2005 December 31, 2004 March 31, 2005
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Standard Lines 64.4% 69.2% 68.1%
Specialty
Lines 59.0 63.5 59.7
Total P&C
Operations 62.5% 67.4% 65.4%
======================================================================
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, and excess and surplus lines, as well as insurance and risk management products sold to large corporations. --Net written premiums decreased $94 million for the first quarter of 2005 as compared with the same period in 2004, primarily due to lower new business in a more competitive marketplace, and decreased retention principally in large account business, heavily driven by workers compensation. Specifically impacting retention were intentional in·ten·tion·al adj. 1. Done deliberately; intended: an intentional slight. See Synonyms at voluntary. 2. Having to do with intention. underwriting actions primarily within unprofitable lines of business. --Standard Lines rate was flat during the first quarter of 2005. --Net income for the first quarter of 2005 decreased $59 million as compared with the same period in 2004, primarily due to decreased net realized investment results. First quarter of 2005 results were also adversely impacted by increased unfavorable net prior year development, primarily in excess and surplus lines, partially offset by a decrease in the bad debt provision for insurance and reinsurance receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , improved current accident year results and lower operating expenses. Specialty Lines provides a broad array of professional, financial and specialty property and casualty products and services. --Net written premiums increased $13 million for the first quarter of 2005 as compared with the same period in 2004, primarily due to rate and increases in retention in the professional liability lines of business. --Specialty Lines achieved average rate increases during the first quarter of 2005 of 2.0%, primarily across professional liability lines. --Net income for the first quarter of 2005 decreased $6 million as compared with the same period in 2004, primarily due to decreased net realized investment results. First quarter of 2005 results were also impacted by increased net prior year development, primarily in the directors and officers line, and decreased investment results. These items were partly offset by improved current net accident year loss ratios. Life and Group Non-Core primarily includes the results of the life and group lines of business that have been sold or placed in run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → . The Group Benefits business was sold on December 31, 2003 and the Individual Life business was sold on April 30, 2004. --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. decreased $160 million for the first quarter of 2005 as compared with the same period in 2004, due primarily to the absence of premiums from the Individual Life business. Net earned premiums for this business in the first quarter of 2004 were $105 million. Additionally, decreased premiums from the specialty medical and structured settlement businesses contributed to the decline in earned premiums. --Net results for the first quarter of 2005 increased $380 million as compared with the same period in 2004. The improvement is primarily due to an after-tax impairment loss recorded in the first quarter of 2004 of $406 million related to the then pending sale of the individual life insurance business. Additionally, improved results from the life settlement contract business contributed to the improvement in net results. These improvements were partially offset by the absence of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. results from the sold individual life business excluding the impact of the impairment loss described above. Corporate and Other Non-Core contains certain corporate 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. claims. In addition, this segment includes the results of certain property and casualty insurance run-off operations, including CNA Re. --Net results for the first quarter of 2005 decreased $13 million as compared with the same period in 2004, primarily due to decreased earned premiums and lower investment results. These items were partly offset by a decrease in the provision for reinsurance receivables as compared with the same period in 2004. Net Investment Income Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern investment income decreased $69 million to $406 million for the first quarter of 2005 as compared with the same period in 2004. This decline is due to reduced investment income from the trading portfolio, and reduced fixed maturity investment income which relates largely to the sale of CNA's individual life business. These declines were partly offset by improved results from short term investments and limited partnerships, in addition to reduced interest expense on funds withheld and other deposits. While the reduced trading portfolio income decreased net investment income, this was offset by a corresponding reduction in certain policyholder Policyholder An individual who owns an insurance policy. funds supported by the trading portfolio. Financial Restatement CNA will restate its financial results for prior years to correct its accounting for several reinsurance contracts, primarily with a former affiliate, and its equity accounting for that affiliate. The impact of this revised accounting results in a reduction to stockholders' equity as of December 31, 2004 of $29 million, or 0.3% and a decrease in net loss for the three months ended March 31, 2004 of $1 million, or 0.8%. The net loss adjustment has no impact on loss per share for the three months ended March 31, 2004. The Company will file a Form 10-K/A for 2004 reflecting the effects of the restatement as follows:
Restated Results as of and for the Years Ended December 31,
----------------------------------------------------------------------
2004 2003 2002
-----------------------------------------------------------
($ millions, As As As
except per Previously As Previously As Previously As
share data) Reported Restated Reported Restated Reported Restated
----------------------------------------------------------------------
Stockholders'
equity $9,207 $9,178 $8,952 $8,918 $9,401 $9,354
Net income
(loss) 441 446 (1,433) (1,419) 155 171
======================================================================
Basic and
diluted
earnings
(loss) per
share
available to
common
stockholders: $1.47 $1.49 $(6.58) $(6.52) $0.68 $0.76
======================================================================
This restatement is based upon reconsideration re·con·sid·er v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers v.tr. 1. To consider again, especially with intent to alter or modify a previous decision. 2. of the Company's accounting for its former equity interest in Accord An agreement that settles a dispute, generally requiring an obligee to accept a compromise or satisfaction from the obligor with something less than what was originally demanded. Also often used synonymously with treaty. ACCORD, in contracts. Re Ltd. (Accord) and for several reinsurance contracts with Accord, but also includes two reinsurance agreements with unaffiliated parties that are immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. in the aggregate. A subsidiary of The Continental Corporation (TCC TCC The Car Connection (web site) TCC Tidewater Community College TCC Tallahassee Community College TCC Temporary Continuation of Coverage TCC Tucson Convention Center (Tucson, AZ, USA) ) acquired a 49% ownership interest in Accord, a Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the company, in 1989 upon Accord's formation. TCC also provided capital
support to Accord through a guarantee from a TCC subsidiary. TCC was
acquired by the Company in 1995.Reinsurance relationships with Accord involved both property and casualty assumed reinsurance risks that were written by TCC subsidiaries and 100% ceded to Accord or reinsured from other cedents by Accord. Stop-loss stop-loss, n a general term referring to that category of coverage that provides insurance protection (reinsurance) to an employer for a self-funded plan. protection in relation to those risks was obtained by Accord from a wholly-owned TCC subsidiary. All of the Company's reinsurance agreements with Accord relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc property risks were commuted as of year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001, leaving six reinsurance agreements with Accord relating to casualty risks outstanding at that time. As of March 31, 2005 the Company provides no capital support to and has no ownership interest in Accord. During the period of the Company's minority ownership Accord also maintained reinsurance relationships with reinsurers unaffiliated with the Company. As previously reported the Company continues to respond to various subpoenas, interrogatories Written questions submitted to a party from his or her adversary to ascertain answers that are prepared in writing and signed under oath and that have relevance to the issues in a lawsuit. and other requests for information received from state and federal regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities relating to on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" insurance industry investigations of non-traditional insurance products, including finite reinsurance Finite Reinsurance A type of reinsurance that transfers over only a finite or limited amount of risk. Risk is reduced through accounting or financial methods, along with the actual transfer of economic risk. . As also previously reported, the Company agreed to undergo a state 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. financial examination of Continental Casualty Company and its insurance subsidiaries as of December 31, 2003. Such review includes examination of certain of the finite reinsurance contracts entered into by the Company and whether such contracts possess sufficient risk transfer characteristics necessary to qualify for accounting treatment as reinsurance. In the course of complying with these requests the Company conducted a comprehensive review of its finite reinsurance relationships, including contracts with Accord. It is possible that the Company's analyses of, or accounting treatment for, other finite reinsurance contracts could be questioned or disputed in the context of the referenced state regulatory examination, and further restatements of the Company's financial results are possible as a consequence, which could have a material adverse impact on the Company's financial condition. About the Company CNA is the country's seventh largest commercial insurance writer and the 14th largest property and casualty company. CNA's insurance products include standard commercial lines, specialty lines, surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. , marine and other property and casualty coverages. CNA's services include risk management, information services See Information Systems. , underwriting, risk control and claims administration. For more information, please 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. ET today. On the conference call will be Stephen Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and W. Lilienthal, Chairman and Chief Executive Officer of the CNA insurance companies, and other members of senior management. Participants can access the call by dialing (800) 478-6251 or for international callers (913) 981-5558. The call 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 on CNA's website through May 10, 2005. The replay can also be accessed by dialing (888) 203-1112 or for international callers (719) 457-0820 and using passcode 9033425. Financial supplement information related to the first quarter results is available on the investor relations pages of the CNA Website or by contacting Ken De Vries de Vries. For some persons thus named use Vries. at (312) 822-1111. FORWARD-LOOKING STATEMENT 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. This press release includes statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. You can identify forward-looking statements because generally they 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. 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 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 change. In evaluating the results of the Standard Lines and Specialty Lines, management utilizes the combined ratio, the loss ratio, the expense ratio, and the dividend ratio. These ratios are calculated using 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). ) financial results. 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 underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. This press release may also contain financial measures that are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. For reconciliations of non-GAAP measures to the most comparable GAAP measures, refer to this press release and the financial supplement posted on the Company's website. |
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