CNA Financial Announces First-Quarter Earnings.Business Editors CHICAGO--(BUSINESS WIRE)--May 3, 2001 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 net income for the first quarter of 2001 of $295 million compared with net income of $141 million for the same quarter in 2000. CNA's book value per share was $55.21 at the end of the first quarter, up from $52.64 at the end of 2000. The increase in book value was driven by increased investment gains and 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. . Operating highlights of first quarter 2001 versus 2000 include: -- Net operating income increased 24% excluding $24 million (after-tax) of non-recurring personal insurance ceding commission included in first quarter 2000 results -- Net operating income of $0.65 per share ($119 million) compared with $0.64 per share ($120 million) -- Continued strong performance in Life Operations -- Net operating income in Group Operations improved $5 million to $15 million. "During the first quarter, our core property-casualty businesses made progress, the individual life business continued to deliver strong results and the group business showed profit improvement," said Bernard Ber·nard , Claude 1813-1878. French physiologist noted for his study of the digestive and nervous systems. L. Hengesbaugh, chairman and chief executive officer of the CNA insurance companies. "Overall, it was a solid quarter of executing on our strategies to improve operating performance and build long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. shareholder value."
Results for the Quarters Ended March 31
Financial Highlights
Net Income Components Per Share Results Available to
($ millions) Common Stockholders
2001 2000 %Change 2001 2000 % Change
---- ---- ------- ---- ---- --------
Net operating
income (1) $ 119 $ 120 (1)% $ 0.65 $ 0.64 2%
Net realized
investment gains 237 21 N/A 1.30 0.12 N/A
Accounting
change (2) (61) -- N/A (0.34) -- N/A
Net income $ 295 $ 141 109% $ 1.61 $ 0.76 112%
(1) Beginning in 2001, income from limited partnership investments is
included in net operating income. Amounts for 2000, which were
previously reported in net realized investment gains, have been
reclassified to conform to the current presentation. See Investment
Highlights for further discussion of this reclassification.
(2) Adoption of SFAS 133, which is a change in accounting for
derivative instruments and hedges.
Summary of Results by Business
Net Operating Income (Loss) Quarter ended Year ended
($ millions) March 31 December 31
2001 2000 2000
---- ---- ----
Agency Market Operations $ 42 $ 43(1) $ 197
Specialty Operations 30 41 163
CNA Re 18 21 75
Global Operations 13 17 50
Risk Management 14 6 51
Group Operations 15 10 49
Life Operations 42 43 179
Corporate and Other and
Eliminations (55) (61) (220)
Net Operating Income (Loss) $ 119 $ 120(1) $ 544
(1) Includes $24 million (after-tax) of non-recurring ceding
commission related to the sale of CNA's personal insurance business.
GAAP Property-Casualty Net Quarter ended Pro Forma Year ended
Written Premiums March 31 March 31 December 31
($ millions)
2001(1) 2000 2001(2) 2000
---- ---- ---- ----
Agency Market Operations $ 678 $ 827 $ 762 $ 3,230
Specialty Operations 136 169 154 805
CNA Re 201 380 201 951
Global Operations 281 281 289 1,160
Risk Management 217 222 220 633
Total $ 1,513 $ 1,879 $ 1,626 $ 6,779
(1) Amounts reflect a change in the timing of recording written premiums for policies with future effective dates. This change was made in conjunction with statutorily required changes. The impact of this change on the first quarter 2001 results was to decrease Net Written Premiums by $113 million. The impact by segment is as follows: Agency Market Operations $84 million, Specialty Operations $18 million, Global Operations Global Operations is a first-person shooter computer game developed by Barking Dog Studios and published by both Crave Entertainment and Electronic Arts. It was released in March of 2002, following its public multiplayer beta version which contained only the Quebec map. $8 million and Risk Management $3 million. This change has no impact on net earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. . (2) Amounts adjusted to add back the impact of the change in the timing of recording net written premiums made for the first quarter of 2001 described above.
GAAP Group and Life Operations
Premium Income
($ millions) Quarter ended Year ended
March 31 December 31
2001 2000 2000
---- ---- ----
Group Operations $ 818 $ 883 $ 3,675
Life Operations 248 212 876
GAAP Property-Casualty Ratios
Combined Ratio Loss Ratio
Quarter Year Quarter Year
ended ended ended ended
March 31 Dec. 31 March 31 Dec. 31
2001 2000 2000 2001 2000 2000
Agency Market Operations 112.0% 113.4% 113.2% 75.3% 81.4% 80.9%
Specialty Operations 112.4 101.7 102.4 84.5 77.6 75.4
CNA Re 114.3 107.9 108.9 75.1 70.2 81.6
Global Operations 103.4 99.3 103.5 60.5 56.7 60.3
Risk Management 120.3 125.3 119.3 84.7 91.6 95.8
Total Property-Casualty
Segments 111.4% 110.0% 110.3% 74.3% 76.2% 78.5%
Total including Corp.
and Other 111.2% 112.8% 112.4% 78.9% 78.5% 81.2%
Business Operating Highlights Agency Market Operations consists primarily of commercial property-casualty insurance products and services to businesses. Excluding the impact of the change to the timing of recording written premiums, net written premiums declined primarily due to the increased use of 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. . Net operating income is relatively flat attributable to improved current year results in Commercial Insurance, CNA E&S and CNA Unisource offset by $24 million (after-tax) of non-recurring ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. commission related to the sale of Personal Lines to Allstate included in 2000 results. Specialty Operations provides a broad array of professional, financial and specialty property-casualty products and services to manage the risks of its clients such as architects, engineers, lawyers, healthcare professionals, financial intermediaries Financial intermediaries institution that provide the market function of matching borrowers and lenders or traders. and corporate directors and officers. The first quarter decline in net written premiums was primarily the result of active decisions to renew only those accounts which meet current underwriting Underwriting 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. guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . The decrease in net operating income was due to the decreased benefit from the use of reinsurance, partially offset by re-underwriting actions. 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, offering both treaty and 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. The decrease in net written premiums reflects decisions made in 2000 to non-renew contracts, including multi-year contracts, that management believed did not meet its underwriting profitability targets. First quarter net operating income declined due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. loss development taken in 2000 as well as a decline in earned premiums. Global Operations includes international, marine, CNA 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. Corporation, First Insurance Company of Hawaii, and warranty businesses. Net written premiums for the first quarter of 2001 were consistent with first quarter 2000. Net operating income declined due to adverse prior year development in the surety lines and adverse loss experience in the marine lines Coordinates: Marine Lines (Marathi:मरीन लाईन्स) is an area in South Mumbai. It is also the name of a railway station on the Mumbai suburban railway on the Western Railway railway line. , partially offset by increased net investment income. Risk Management serves the property-casualty needs of large domestic commercial businesses, offering customized strategies to address the management of business risks. Excluding the change in the timing of recording written premiums for policies with future effective dates, first quarter net written premiums were flat as compared to prior year. Quarter-over-quarter net operating income improved due to favorable loss experience and decreased 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. in the casualty line, partially offset by unfavorable results in the property line. Group Operations provides a broad array of group life and health insurance products and services. Earned premiums decreased due to the Life Reinsurance sale at the end of 2000, as well as the termination of contracts with unprofitable independent underwriting agencies. The increase in net operating income is a result of exiting unprofitable medical-related lines of business in 2000 and lower expenses in Federal Markets, which more than offset the sale of Life Reinsurance. Life Operations offers 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. Sales volume declined in the first quarter due primarily to lower variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. sales, which were influenced by the decline in the stock market, and retirement products sold to institutions. Net operating income decreased for the quarter due to lower net investment income, partially offset by earnings improvement from the Index 500 Product and Individual Life and Long Term Care businesses. Investment Highlights CNA Financial Corporation and its subsidiaries' (the Company) investment results during 2001 reflect net realized investment gains (after-tax) of $237 million, an increase of $216 million in the first three months of 2001 as compared with the same period in 2000. This increase primarily relates to gains resulting from sales of fixed maturity securities and the sale of a New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of real estate property. The Company continues its total return investment management approach to asset management. 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 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. Generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) do not allow any portion of the 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 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, which is not in conformance con·for·mance n. Conformity. Noun 1. conformance - correspondence in form or appearance conformity agreement, correspondence - compatibility of observations; "there was no agreement between theory and with GAAP, that offsets forgone interest income by amortizing the 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. The table below presents the pro forma effect on NOI and net income from the Company's non-GAAP adjustment.
Quarter ended March 31
($ millions)
2001 2000
---- ----
Net operating income (loss) as
reported under GAAP $ 119 $ 120
After-tax pro forma investment income
adjustment - fixed income securities 20 23
Pro forma net operating income - adjusted 139 143
Pro forma net realized gains, net
of adjustments 92 82
Pro forma net income - adjusted $231(1) $ 225
(1) Excluding effect of change in accounting principle for SFAS 133.
Further information regarding these adjustments is available in the Financial Supplement. During the first quarter of 2001, the Company reclassified equity method income from limited partnership investments. This income was previously classified in realized investment gains, net of participating policyholders' and minority interest. Effective in 2001, pre-tax income from limited partnership investments amounting to $36 million and $56 million for the quarter ended March 31, 2001 and 2000 is classified in net investment income. The after-tax impact of this reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. was to increase net operating income by $24 million and $36 million at March 31, 2001 and 2000. About the Company CNA is a leading insurance organization offering a broad range of insurance products and insurance-related services. Since 1897, CNA has built a foundation of financial strength, stability and commitment to customers and business partners. Visit CNA at www.cna.com. CNA is a registered service mark, trade name and domain name of CNA Financial Corporation. 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 forward-looking statements. Such statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. These matters and risks (many of which are beyond the Company's control) are described 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 publicly any updates or revisions to any forward-looking statement contained herein 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. NOTE: 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 Robert V. Deutsch, Chief Financial Officer of the CNA insurance companies. Participants can access the call by dialing 800-811-8824 or for international callers 913-981-4903. It will also be broadcast live on the internet at http://www.cna.com/cna/html/investor.html 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 9, 2001 by dialing 888-203-1112 or for international callers 719-457-0820 and using passcode 416430. 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 first-quarter earnings is available on the investor relations pages of the CNA Website or by contacting Donald P. Lofe, Jr. at 312-822-3993. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion