CNA Financial Reports 2001 Second Quarter Results.Business Editors CHICAGO--(BUSINESS WIRE)--Aug. 2, 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-CNA) -- Company Strengthens Reserves; Reports Loss After Charges -- Plans $1 Billion Rights Offering CNA Financial Corporation (NYSE-CNA) today issued 2001 second quarter results. The company said that as a result of charges in connection with significant reserve strengthening, a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. related to information technology, and realized losses 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. associated with certain subsidiary operations, CNA (Certified NetWare Administrator) See Novell certification. posted a loss for the quarter. The company also said that it intends to increase capital through a $1 billion rights offering in the third quarter. For the second quarter of 2001, CNA reported a net loss of $1,762 million ($9.61 per share) compared with net income of $330 million ($1.80 per share) for the same quarter in 2000. CNA's book value per share was $41.43 at the end of the second quarter, compared with $52.64 at the end of 2000. The second quarter net loss includes the following 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. charges: -- $2.1 billion, or $11.34 per share, related to a change in estimate of prior year loss reserves and premium accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . -- $36 million, or $0.20 per share, of 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). and other related charges related to workforce reductions as well as asset write-offs resulting from changes in the company's information technology organization. -- $320 million, or $1.75 per share, of estimated realized loss related to the planned disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of certain subsidiary operations, principally the U.K. 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. subsidiary of CNA Re. CNA Re will continue to operate as a global 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. . During the second quarter of 2001, the company noted the continued emergence of adverse loss experience across several lines of business related to prior years. The company completed a number of reserve studies during the second quarter of 2001 for many of its lines of business, including those in which these adverse trends were noted. In the area 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. and environmental pollution, the company reviewed internal claims data as well as studies generated by external parties, including a significant industry analysis on asbestos and environmental pollution published by an international rating agency. The result of these various reviews caused management to conclude that ultimate losses, including losses for asbestos, 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, will be higher in the range of possible outcomes. The company recorded a $1.7 billion after-tax charge associated with a change in estimate of prior year net loss and allocated loss adjustment expense reserves ("loss reserves"), including $0.8 billion after-tax related to asbestos, environmental pollution and mass tort claims. Concurrent At the same time. It implies that multiple processes are taking place simultaneously. See concurrent operation. with the company's review of loss reserves, the company completed a comprehensive study of estimated premium receivable accruals due on retrospectively rated insurance A type of insurance that uses retrospective rating: a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium policies and involuntary involuntary adj. or adv. without intent, will, or choice. Participation in a crime is involuntary if forced by immediate threat to life or health of oneself or one's loved ones, and will result in dismissal or acquittal. INVOLUNTARY. market facilities. As a result, the company recorded a $0.4 billion after-tax charge related to retrospective LAW, RETROSPECTIVE. A retrospective law is one that is to take effect, in point of time, before it was passed. 2. Whenever a law of this kind impairs the obligation of contracts, it is void. 3 Dall. 391. premium and other premium accruals ("premium accruals"). The study included the review of all such retrospective insurance policies and the current estimate of ultimate losses. "Following a thorough review, we have determined that this reserve strengthening appropriately addresses business from prior years," said Bernard Ber·nard , Claude 1813-1878. French physiologist noted for his study of the digestive and nervous systems. L. Hengesbaugh, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of CNA. "Importantly, CNA remains a financially strong company. We believe the reserve strengthening, in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with our continuing focus on 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. excellence and expense reduction programs, will enable CNA to drive operating performance and position CNA as one of the most competitive and well capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. companies in the insurance industry." CNA expects to commence a rights offering of its common stock. CNA's common shareholders of record on August 23, 2001 will receive rights for each common share they own that will entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: the holder of rights to purchase CNA common shares at a specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. price. Loews The name Loews can refer to several articles in the Wikipedia:
adj. 1. Almost exact or correct: the approximate time of the accident. 2. 87% of CNA's shares will exercise its rights to purchase common shares and will purchase any shares that are not subscribed Subscribed Newly issued securities that an investor has agree to, or stated his intent to, buy in a public offering prior to the issue date. When an investor uses rights, he expects to own the designated number of shares they have subscribed to once the offering is completed. for by other shareholders. The number of shares of common stock that CNA will offer in the rights offering, the number of rights distributed in respect of each common share, the number of rights that will be required to purchase a common share, the exercise price per share and how long the rights offering will be open will be determined before the record date. Full details will be described in the prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. and other information that CNA will mail to shareholders as of the record date. CNA expects to make that mailing on or about August 24, 2001. The rights are expected to be transferable and traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol CNA.RT. Shareholders who do not subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day" subscribe, take buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company"; common stock may attempt to sell their rights on the New York Stock Exchange until the business day before the rights expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. . CNA cannot assure anyone that a market for the rights will develop. This is not an offer to sell common shares. Offers will only be made pursuant to the final prospectus Final Prospectus A legal document stating the price of a newly issued security, the delivery date, and other facts that are important for investors. Notes: The final prospectus must be given to every investor who purchases a new issue of registered securities. . Information below is presented both on an as recorded basis and also on 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 basis. Pro forma results exclude the second quarter 2001 charge related to the change in estimate of prior year loss reserves and premium accruals as well as the restructuring and other related charge and the effects of certain corporate aggregate reinsurance covers for the first six months of 2001.
Results for the Quarter Ended June 30
Financial Highlights
Net Income Components Per Share Results Available
($ millions) to Common Stockholders
----------------------- ---------------------------
% %
2001 2000 Change 2001 2000 Change
------ ------ ------ ------ ------ ------
Net operating
(loss)
income(a) ($2,075) $154 N/A ($11.32) $0.84 N/A
Net realized
investment
gains 313 176 78% 1.71 0.96 78%
Accounting
change -- -- N/A N/A N/A N/A
Net (loss)
income ($1,762) $330 N/A ($9.61) $1.80 N/A
(a) Beginning in 2001, income from limited partnership investments
is included in net operating income. Amounts for 2000, which were
previously reported in net realized investment gains, have been
reclassified to conform to the current presentation.
Results for the Six Months Ended June 30
Financial Highlights
Net Income Components Per Share Results Available
($ millions) to Common Stockholders
----------------------- ---------------------------
% %
2001 2000 Change 2001 2000 Change
Net operating
(loss)
income(b) ($1,956) $274 N/A ($10.67) $1.49 N/A
Net realized
investment
gains 550 197 N/A 3.01 1.07 N/A
Accounting
change(c) (61) -- N/A (0.34) N/A N/A
Net (loss)
income ($1,467) $471 N/A ($8.00) $2.56 N/A
(b) Beginning in 2001, income from limited partnership investments is
included in net operating income. Amounts for 2000, which were
previously reported in net realized investment gains, have been
reclassified to conform to the current presentation.
(c) Adoption of SFAS 133, which is a change in accounting for
derivative instruments and hedges.
Pro Forma Net Operating Income for the Quarter
and Six Months Ended June 30
Financial Highlights
Net Income Components Per Share Results Available
($ millions) to Common Stockholders
----------------------- ---------------------------
% %
2001 2000 Change 2001 2000 Change
------ ------ ------ ------ ------ ------
Net operating
income(d) $48 $154 (69%) $0.26 $0.84 (69%)
Quarter Ended
June 30
Net operating
income(d) $177 $274 (35%) $0.97 $1.49 (35%)
Six Months
Ended June 30
(d) Beginning in 2001, income from limited partnership investments is
included in net operating income. Amounts for 2000, which were
previously reported in net realized investment gains, have been
reclassified to conform to the current presentation.
Reconciliation of Net Operating Income As Reported to Pro Forma
For the Quarter Ended June 30
After Tax Special Charges
Included in Net Operating
Income
($ millions) Quarter Ended June 30 2001
2001
As Reported Corporate
Net Aggregate Restructuring
Operating Reserve Reinsurance and Other
Income Charge Covers Related Charges
----------- ------- ----------- ---------------
Agency Market
Operations ($772) $805 $6 $3
Specialty Operations (214) 238 1 1
CNA Re (369) 384 1 -
Global Operations (138) 87 1 -
Risk Management (564) 575 1 1
Group Operations 16 - - -
Life Operations 27 - - 11
Corp and Other and
Eliminations (61) (10) (2) 20
======== ======= ==== ====
Total ($2,075) $2,079 $8 $36
Reconciliation of Net Operating Income As Reported to Pro Forma
For the Quarter Ended June 30
(continued)
After Tax Special Charges
Included in Net Operating
Income
($ millions) Quarter Ended June 30 2001
---------------------------
Pro Forma
Net
Total Operating Quarter Ended
Adjustments Income June 30 2000
----------- --------- -------------
Agency Market Operations $814 $42 $68(e)
Specialty Operations 240 26 43
CNA Re 385 16 24
Global Operations 88 (50) (1)
Risk Management 577 13 13
Group Operations - 16 15
Life Operations 11 38 49
Corp and Other and
Eliminations 8 (53) (57)
====== ===== ======
Total $2,123 $48 $154(e)
(e) Includes $16 million (after-tax) of non-recurring ceding
commission related to the sale of CNA's personal insurance
business.
Further information regarding these adjustments is available in
the Financial Supplement.
Reconciliation of Net Operating Income As Reported to Pro Forma
For the Six Months Ended June 30
After Tax Special Charges
Included in Net Operating
Income
($ millions) Six Months Ended June 30 2001
-----------------------------
2001
As Reported Corporate
Net Aggregate Restructuring
Operating Reserve Reinsurance and Other
Income Charge Covers Related Charges
----------- ------- ----------- ---------------
Agency Market
Operations ($730) $805 $8 $3
Specialty Operations (184) 238 2 1
CNA Re (351) 384 1 -
Global Operations (125) 87 2 1
Risk Management (550) 575 1 1
Group Operations 31 - - -
Life Operations 69 - - 11
Corp and Other and
Eliminations (116) (10) - 23
======== ======= ==== ====
Total ($1,956) $2,079 $14 $40
Reconciliation of Net Operating Income As Reported to Pro Forma
For the Six Months Ended June 30
(continued)
After Tax Special Charges
Included in Net Operating
Income
($ millions) Six Months Ended June 30 2001
-----------------------------
Pro Forma
Net Six Months
Total Operating Ended June
Adjustments Income 30 2000
----------- --------- ----------
Agency Market Operations $816 $86 $111(f)
Specialty Operations 241 57 84
CNA Re 385 34 45
Global Operations 90 (35) 16
Risk Management 577 27 19
Group Operations - 31 26
Life Operations 11 80 92
Corp and Other and
Eliminations 13 (103) (119)
====== ====== =======
Total $2,133 $177 $274(f)
(f) Includes $40 million (after-tax) of non-recurring ceding
commission related to the sale of CNA's personal insurance
business.
Further information regarding these adjustments is available in
the Financial Supplement.
Property-Casualty Net Written Premiums
GAAP Property-Casualty Net Written
Premiums Adjusted Year
($ millions) Quarter Six Months Adjusted June 30 Ended
ended Ended June 30 Year- December
June 30 June 30 Quarter to-Date 31
------------ -------------- -------- -------- --------
2001(g) 2000 2001(g) 2000 2001(h) 2001(h) 2000
----- ---- ------ ----- ------ ------ -----
Agency Market
Operations $389 $821 $1,067 $1,648 $389 $1,151 $3,230
Specialty
Operations 207 173 343 343 207 361 805
CNA Re 69 176 270 556 69 270 951
Global
Operations 309 295 590 576 310 599 1,160
Risk
Management (11) 155 206 377 (7) 213 633
===== ====== ====== ====== ==== ====== ======
Total $963 $1,620 $2,476 $3,500 $968 $2,594 $6,779
(g) 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 for the six months ended June 30, 2001 was to
decrease Net Written Premiums by $118 million. The impact by
segment is as follows: Agency Market Operations $84 million,
Specialty Operations $18 million, Global Operations $9 million and
Risk Management $7 million. The impact of this change on the
second quarter 2001 results was to decrease Net Written Premiums
by $5 million, $1 million for Global Operations and $4 million for
Risk Management. This change has no impact on net earned premiums.
(h) Amounts adjusted to add back the impact of the change in the
timing of recording net written premiums made for the second
quarter of 2001 and for the year to date second quarter 2001
described above.
Pro Forma Property-Casualty Net Written Premiums
GAAP Property-Casualty
Net Written Premiums
($ millions) Quarter Ended June 30 Six Months Ended June 30
--------------------- ------------------------
2001 2000 2001 2000
------ ------ ------ ------
Agency Market
Operations $855 $821 $1,556 $1,648
Specialty
Operations 218 173 360 343
CNA Re 90 176 293 556
Global
Operations 310 295 597 576
Risk Management 148 155 370 377
======= ======= ======= =======
Total $1,621 $1,620 $3,176 $3,500
GAAP Group and Life Operations
Premium Income
($ millions) Quarter Ended Six Months Ended Year Ended
June 30 June 30 December 31
------------- ---------------- -----------
2001 2000 2001 2000 2000
Group Operations $830 $878 $1,648 $1,760 $3,675
Life Operations 244 226 492 438 876
Pro Forma Property-Casualty Ratios
For Quarter Ended June 30
GAAP Property-Casualty Ratios
Combined Ratio Loss Ratio
Quarter Ended Quarter Ended
June 30 June 30
-------------- -------------
2001 2000 2001 2000
-------- -------- -------- -------
Agency Market
Operations 107.0% 111.7% 73.1% 79.2%
Specialty
Operations 106.7% 102.7% 79.8% 69.3%
CNA Re 113.9% 108.8% 75.8% 79.3%
Global
Operations 129.3% 112.4% 65.8% 68.4%
Risk Management 112.3% 121.2% 85.0% 92.4%
====== ====== ===== =====
Total Property-
Casualty Segments 111.8% 111.4% 74.0% 77.8%
====== ====== ===== =====
Total Including
Corporate and Other 110.0% 113.2% 79.8% 79.0%
Pro Forma Property-Casualty Ratios
For Six Months Ended June 30
GAAP Property-Casualty Ratios
Combined Ratio Loss Ratio
Six Months Ended Six Months Ended
June 30 June 30
---------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Agency Market
Operations 109.1% 112.5% 74.4% 80.3%
Specialty
Operations 109.1% 102.2% 82.1% 74.0%
CNA Re 113.9% 108.4% 75.6% 75.0%
Global Operations 115.6% 105.8% 63.2% 62.5%
Risk Management 115.6% 123.2% 85.0% 92.0%
====== ====== ===== =====
Total Property-
Casualty Segments 111.4% 110.7% 74.5% 77.1%
====== ====== ===== =====
Total Including
Corporate and Other 110.3% 113.0% 79.5% 78.8%
Business Operating Highlights Agency Market Operations consists primarily of commercial property-casualty insurance products and services to businesses. Second quarter 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. declined by $840 million compared to the prior year. The after-tax impact of the reserve charge on Agency Market Operations was $805 million, including $394 million for asbestos, environmental pollution and mass tort claims. The remaining reserve strengthening related primarily to commercial multiple-peril, general liability and commercial automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of liability coverages. The charge was based upon detailed claim reviews, assessments of legal developments affecting these coverages and actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin analyses completed in the second quarter. In response to the adverse trends indicated by these reviews, changes were made to more closely involve legal counsel on claims affected by legal developments and to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: writing classes of business where adequate pricing cannot be achieved for the exposure. In addition to the impact of the reserve charge, net operating income was decreased by $6 million related to the cost of the 2001 accident year corporate aggregate 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 and $3 million of restructuring charges. Apart from those charges, net operating income decreased $26 million due primarily to decreased net investment income, principally as a result of limited partnership investments, partially offset by improved current year underwriting results. Net written premiums for Agency Market Operations in the second quarter decreased $432 million over the prior year as a result of $233 million of ceded premiums related to the corporate aggregate reinsurance treaties, additional ceded premiums arising from the reserve strengthening and a change in estimate for involuntary market premium accruals, partially offset by higher premiums in the worker's compensation, automobile, and package lines. Specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. 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. Second quarter net operating income declined by $257 million compared to the prior year. The after-tax impact of the reserve charge on Specialty Operations was $238 million. The reserve strengthening related primarily to the medical malpractice Improper, unskilled, or negligent treatment of a patient by a physician, dentist, nurse, pharmacist, or other health care professional. and national for profit nursing home chains, with exposure in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and and Texas, components of our healthcare book. The charge was necessitated by the continuing emergence of reported losses in excess of our expectations and a thorough review of claim exposures by the new management team that was put in place during 2000. In response to these adverse trends, we have withdrawn from writing these coverages in certain states and have instituted major rate increases. In addition to the impact of the reserve charge, net operating income was decreased by $1 million related to the cost of the 2001 accident year corporate aggregate reinsurance treaties and $1 million of restructuring charges. Apart from those charges, net operating income decreased $17 million due primarily to decreased net investment income, principally resulting from limited partnership investments. Net written premiums for Specialty Operations in the second quarter increased $34 million over the prior year as a result of strong production in lawyers and architects and engineers products, price increases for small not-for-profit Not-for-profit An organization established for charitable, humanitarian, or educational purposes that is exempt from some taxes and in which no one in profits or losses. long term care facilities and decreased use of treaty reinsurance on the healthcare book, partially offset by $13 million of ceded premiums related to the corporate aggregate reinsurance treaties on accident year 2001. CNA Re operates globally as a reinsurer 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 after-tax impact of the reserve charge on CNA Re was $384 million, including $37 million for asbestos, environmental pollution and mass tort claims. The charge was based upon second quarter reviews that showed the emergence of higher than expected reported losses. The reserve strengthening relates to a number of lines, including excess of loss liability and professional liability in accident years 1997 to 2000. We have continued to take significant underwriting and pricing actions to ensure the appropriate premium is being charged for the risk. As a result, premium volume has decreased significantly. In addition to the impact of the reserve charge, net operating income was decreased by $1 million related to the cost of the 2001 accident year corporate aggregate reinsurance treaties and lower net investment income, principally due to limited partnership investments. Net written premiums for CNA Re in the second quarter decreased by $107 million from the prior year due to decisions made in 2000 not to renew contracts, including multi-year contracts, that management believed did not meet its underwriting profitability targets and $34 million of premiums ceded to the corporate aggregate reinsurance treaties. 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. 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 Hawaii, island, United States Hawaii, island (1990 pop. 120,217), 4,037 sq mi (10,456 sq km), largest and southernmost island of the state of Hawaii and coextensive with Hawaii co.; known as the Big Island. , and warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. businesses. The after-tax impact of the reserve charge on Global Operations was $87 million, including $25 million for asbestos, environmental pollution and mass tort claims. The remaining reserve strengthening related to marine business as a result of a second quarter review which indicated an increase in large claim frequency in marine cargo and hull for accident years 1998 though 2000. In addition, Global Operations strengthened reserves related to higher than expected losses arising from high hazard hazard a risk. hazard analysis critical control points a systematic procedure used to identify specific hazards (for example in food production) and establish control systems that focus on preventive measures rather than rely on commercial auto business. In response to these adverse trends, Global Operations has taken rate action and reduced exposure to unprofitable marine cargo and hull classes of business and exited the high hazard commercial auto business. In addition to the impact of the reserve charge, net operating income was decreased by $1 million related to the cost of the 2001 accident year corporate aggregate reinsurance treaties. Apart from those charges, net operating income decreased $49 million due primarily to writing off unrecoverable deferred acquisition costs and better aligning a·lign v. a·ligned, a·lign·ing, a·ligns v.tr. 1. To arrange in a line or so as to be parallel: align the tops of a row of pictures; aligned the car with the curb. premium earnings patterns with the emergence of claims in the vehicle warranty line of business. Net written premiums for Global Operations in the second quarter increased $14 million over the prior year as a result of growth in the commercial casualty and property lines in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations and vehicle warranty and medical equipment contract lines, as well as production increases in surety lines. Risk Management serves the property-casualty needs of large domestic commercial businesses, offering customized strategies to address the management of business risks. The after-tax impact of the reserve charge on Risk Management was $575 million, including $322 million for asbestos, environmental pollution and mass tort claims. The remaining reserve strengthening related primarily to adverse experience in liability coverages and retrospective premium accruals. The change in estimate was driven by adverse indications in loss reserve and retrospective premium studies. In response to the adverse loss trends, Risk Management has walked away from business where adequate price could not be achieved for exposure and has continued to achieve double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. price increases through 2001. In addition to the impact of the reserve charge, net operating income was decreased by $1 million related to the cost of the 2001 accident year corporate aggregate reinsurance treaties and $1 million of restructuring charges. Apart from those charges, net operating income remained flat in the second quarter of 2001 due to improved current year casualty underwriting results and increased earnings in RSKCo(SM), partially offset by the impact of Tropical Storm Allison This article is about the Atlantic tropical storm of 2001. For other storms of the same name, see Tropical Storm Allison (disambiguation). Tropical Storm Allison was a tropical storm that devastated southeast Texas in June of the 2001 Atlantic hurricane season. catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses and decreased net investment income, principally due to limited partnership investments Net written premiums for Risk Management in the second quarter decreased $166 million from the prior year as a result of $133 million of ceded premiums related to the corporate aggregate reinsurance treaties and a change in estimate for involuntary market premium accruals. Group Operations provides a broad array of group life and health insurance products and services. 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 due to the sale of the Life Reinsurance business at the end of 2000, as well as the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. in 2000 of unprofitable contracts with independent underwriting agencies. The increase in net operating income is a result of exiting unprofitable medical-related lines of business in 2000 which more than offset the effect of the sale of Life Reinsurance and the impact of the 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. of limited partnership investments. 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 increased in the second quarter primarily in guaranteed investment contracts Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a single premium, to pay at a maturity date the principal amount of a predetermined annual crediting (interest) rate over the life of the investment. sold to institutional customers and a growing in-force block of business in long term care. Net operating income decreased due to lower investment performance in the Index 500 product, increased mortality losses on life and term products and decreased net investment income, especially limited partnership investments. Investment Highlights For the second quarter of 2001, the Company had after-tax net 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. of $313 million compared with $176 million for the same period of 2000. The Company's investment results during the second quarter 2001 reflect after-tax realized gains of $633 million related to the sale of the remaining shares of Global Crossing Ltd. (Global Crossing) common stock. Also included in this quarter's net gain are after-tax realized losses of $320 million related to the planned sale of certain subsidiary operations. 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, pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. (loss) from limited partnership investments amounting to ($4 million) and $103 million for the quarter ended June June: see month. 30, 2001 and 2000 is classified in net investment income. The after-tax impact of this reclassification was to decrease net operating income by $3 million for the quarter ended June 30, 2001 and to increase net operating income by $67 million for the same quarter of 2000. 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 In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. 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. The Company views these gains as an acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. 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 the gains or losses to be considered interest income. For internal purposes, the Company prepares a 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, 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 Six months ended
($ millions) June 30 June 30
------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Net operating (loss)
income as reported
under GAAP ($2,075) $154 ($1,956) $ 274
After-tax pro forma
investment income
adjustment -
fixed income
securities 22 21 42 44
Pro forma net
operating (loss)
income - adjusted (2,053) 175 (1,914) 318
Pro forma net
realized gains,
net of adjustments 346 218 438 300
Pro forma net
(loss) income -
adjusted(i) ($1,707) $393 ($1,476) $618
(i) Excluding effect of change in accounting principle for SFAS 133.
Further information regarding these adjustments is available in the Financial Supplement. 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 intended to identify forward-looking statements. Forward looking statements include expected losses in the Company's insurance business, including losses for asbestos, environmental pollution and mass tort claims; the Company's expectations to commence a rights offering, any terms of the rights offering and the participation by Loews Corporation in the rights offering; the Company's expectations concerning its revenues, earnings, expenses and investment activities; expected cost savings and other results from the Company's restructuring activities; and 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, inherently are subject to a variety of risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, the impact of competitive products, policies and pricing and the competitive environment in which the Company operates; product and policy demand and market responses; development of claims and the effect on loss reserves; 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 mass tort claims; the sufficiency of the Company's loss reserves and the possibility of future increases in reserves; the performance of reinsurance companies under contracts with the Company; general economic and business conditions; the relatively small volume of the Company's common stock that is actively traded; possible decrease in the market price of the Company's common stock as a result of trading activity by directors and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. officers of the Company's insurance subsidiaries pursuant to stock and stock option grants; ownership by Loews Corporation of approximately 87% of the Company's outstanding common stock and its consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. power to elect the Company's Board of Directors and influence its affairs; changes in financial markets (interest rate, credit, currency, commodities and stocks); changes in foreign, political social and economic conditions; limitations upon the Company's ability to receive dividends from its insurance subsidiaries imposed by state regulatory agencies state regulatory agency A state body responsible for establishing professional standards, and for certifying professionals or organizations through appropriate documentation and minimum risk-based capital standards established by the National Association of Insurance Commissioners The National Association of Insurance Commissioners (NAIC) is an Internal Revenue Code Section 501(c)(3) non-profit organization which seeks to organize the regulatory and supervisory efforts of the various state insurance commissioners from around the United States. ; 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. limitations and restrictions upon the Company and its insurance subsidiaries generally, including without limitation, possible limitations and restrictions on the rights offering described above; regulatory initiatives and compliance with governmental regulations; judicial decisions and rulings; the possibility of downgrades in the Company's ratings by ratings agencies and changes in rating agency policies and practices; the results of financing efforts; changes in the Company's composition of operating segments; 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 publicly any updates or revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. 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 Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. V. Deutsch Deutsch is the German language word for German (adjective). Deutsche are Germans, while [ein] Deutscher is [a] German. Deutsch, and its various forms, may refer to:
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 August 8, 2001 by dialing 888-203-1112 and using passcode 579311 or for international callers 719-457-0820 and using passcode 579311. 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 second-quarter earnings 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. |
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