Investment Income Helped Boost CNA’s Q1 Results

CNA Financial Corp. saw big gains in its 2017 first quarter net income, mostly coming from a boost in net investment income and lower underwriting expenses.

Net income for Q1 came in at $260 million and net operating income was $235 million, compared to $66 million and $91 million, respectively, for the first quarter of 2016, CNA said.

Property & Casualty Operations’ net operating income was $268 million for the first quarter of 2017 as compared with $207 million in the prior year quarter. This increase was primarily due to higher net investment income and lower underwriting expenses partially offset by unfavorable premium development. Catastrophe losses were $24 million, after tax, for the quarters ended March 31, 2017 and 2016.

Property & Casualty Operations’ combined ratio for the first quarter was 97.2.

“Given our focus on underwriting performance and expense discipline, I am pleased that each of our P&C segments produced underlying adjusted combined ratios equal to or better than last year’s first quarter,” Dino E. Robusto, chairman and chief executive officer, said in prepared remarks.

Net operating loss for non-core segments improved by $83 million for the first quarter of 2017 to $37 million as compared with the prior year quarter. The improvement was primarily in the Corporate & Other Non-Core segment driven by lower adverse prior year reserve development recorded in 2017 under the Asbestos and Environmental Pollution (A&EP) 2010 Loss Portfolio Transfer as compared to 2016. The Life & Group Non-Core segment added $6 million of improvement, generating $4 million of net operating income.

Net investment income, after tax, increased to $389 million, up from $315 million in the prior year quarter.

Segment results included:

Specialty Lines

• Net operating income increased $27 million for the first quarter of 2017 as compared with the prior year quarter, primarily due to higher net investment income.
• The combined ratio increased 0.8 points as compared with the prior year quarter. The loss ratio increased 1.1 points driven by lower favorable net prior year development. Catastrophe losses were $4 million, or 0.5 points of the loss ratio in the first quarter of 2017, as compared to $4 million, or 0.6 points of the loss ratio, for the prior year quarter. The expense ratio improved 0.2 points as compared with the prior year quarter.
• Net written premiums decreased $5 million as compared with the prior year quarter driven by lower new business. Average rate increased 1 percent for the policies that renewed in the first quarter of 2017 while achieving a retention of 88 percent.

Commercial Lines

• Net written premiums decreased $33 million for the first quarter of 2017 as compared with the prior year quarter, due to unfavorable premium development driven by a premium adjustment within Small Business partially offset by higher new business within Middle Markets. Average rate was flat for the policies that renewed in the first quarter of 2017 while achieving a retention of 83 percent.
• Net operating income increased $20 million for the first quarter of 2017 as compared with the prior year quarter, due to higher net investment income, lower underwriting expenses and higher favorable net prior year loss reserve development, partially offset by unfavorable premium development driven by the Small Business premium adjustment.
• The combined ratio increased 3.0 points for the first quarter of 2017, as compared with the prior year quarter, due to the unfavorable premium development.
• Catastrophe losses were $27 million, or 4.0 points of the loss ratio in the first quarter of 2017, as compared to $28 million, or 4.1 points of the loss ratio, for the prior year quarter.

Source: CNA