CNA Financial Corporation Third Quarter 2023 Results

October 30, 2023

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2

Third Quarter Overview

  • Net income of $258 million versus net loss of $42 million in the prior year quarter; core income of $289 million versus $43 million in the prior year quarter.
  • Core income up 56% to $291 million versus $186 million in the prior year quarter, excluding the results of the Life & Group annual reserve reviews.
  • P&C core income up 35% to $351 million versus $260 million in the prior year quarter, reflects higher net investment income, record high pretax underlying underwriting income and lower catastrophe losses.
  • Life & Group core loss of $29 million versus $192 million in the prior year quarter, reflects an unfavorable after- tax impact of $2 million in 2023 and $143 million in 2022 as a result of the annual reserve reviews. Results for the prior year quarter have been adjusted to reflect the application of the LDTI accounting standard.
  • Net investment income up 31% to $553 million pretax, includes a $72 million increase from limited partnerships and common stock to $28 million and a $59 million increase from fixed income securities and other investments to $525 million.
  • P&C combined ratio of 94.3%, compared with 95.8% in the prior year quarter, including 4.1 points of catastrophe loss impact compared with 5.5 points in the prior year quarter. P&C underlying combined ratio was 90.4% compared with 91.1%, in the prior year quarter. P&C underlying loss ratio was 60.0% and the expense ratio was 30.1%.
  • P&C segments, excluding third party captives, generated gross written premium growth of 7% and net written premium growth of 6%. P&C renewal premium change of +6%, with written rate of +5% and exposure change of +1%.
  • Book value per share of $31.61; book value per share excluding AOCI of $45.43, a 7% increase from year-end 2022 adjusting for $2.46 of dividends per share.
  • Board of Directors declares regular quarterly cash dividend of $0.42 per share.

3

Financial Performance

Core income1 up 56% after excluding impact of Life & Group reserve assumption update in 2023 and 2022

(In millions, except ratios and per share data)

Revenues

Core income 1

Net income

Diluted earnings per common share: Core income

Net income

Third Quarter

2023

2022 2

Change

$3,336

$2,957

13 %

289

43

N/M

258

(42)

N/M

$1.06

$0.16

N/M

0.95

(0.15)

N/M

Year to Date

2023

2022 1

Change

$9,792

$8,768

12 %

922

571

61 %

838

443

89 %

$3.39

$2.10

61 %

3.08

1.63

89 %

Core ROE

9.4 %

1.4 % 8.0 pts

10.1 %

6.2 % 3.9 pts

  • Excluding the impact of the L&G assumption updates, core income was $291 million and $186 million for the third quarter of 2023 and 2022 and $924 million and $714 million for 2023 and 2022 year to date.
  • As of January 1, 2023, the Company adopted Accounting Standards Update (ASU) 2018-12, Financial Services-Insurance

(Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI) using the modified retrospective

method applied as of the transition date of January 1, 2021. Prior period amounts have been adjusted to reflect4 application of the new guidance.

Property & Casualty Operations

Continued strong profitability

(In millions, except ratios)

GWP ex. 3rd party captives

GWP change (% year over year)

Net written premium

NWP change (% year over year)

Net earned premium

NEP change (% year over year)

Underwriting gain

Loss ratio excl. catastrophes and development Impact of catastrophes

Impact of development-related items

Loss ratio

Expense ratio

Combined ratio

Combined ratio excl. catastrophes and development

Third Quarter

2023

2022

$2,595

$2,430

7 %

$2,178

$2,060

6 %

$2,295

$2,103

9 %

$131

$84

60.0 %

59.9 %

4.1 %

5.5 %

(0.2)%

(0.8)%

63.9 %

64.6 %

30.1 %

30.8 %

94.3 %

95.8 %

90.4 %

91.1 %

Year to Date

2023

2022

$8,305

$7,560

10 %

$6,938

$6,379

9 %

$6,662

$6,080

10 %

$399

$425

59.9 %

60.0 %

3.2 %

2.8 %

- %

(0.9)%

63.1 %

61.9 %

30.6 %

30.8 %

94.0 %

93.0 %

90.8 %

91.1 %

5

Property & Casualty Production Metrics

Continue to manage rate/retention dynamic effectively

Property & Casualty Rate & Retention

2022

2023

Q1 Q2 Q3 Q4

Q1

Q2 Q3

84%

86%

86%

86%

86%

86%

84%

Retention

Renewal Premium Change

Rate

10%

8%

8%

7%

7%

7%

6%

7%

6%

5%

4%

5%

5%

5%

GWP ex. 3rd party captives ($M)

$2,454

$2,676

$2,430

$2,704

$2,724

$2,986

$2,595

New Business ($M)

$451

$500

$455

$470

$503

$555

$475

Specialty

Rate

10%

7%

5%

3%

2%

(1)%

1%

Retention

84%

85%

88%

88%

88%

89%

87%

Commercial

Rate

5%

5%

4%

5%

7%

8%

8%

Retention

87%

87%

86%

86%

86%

85%

83%

International

Rate

9%

6%

6%

4%

4%

4%

2%

Retention

73%

84%

83%

84%

83%

83%

84%

6

Specialty

Continued excellent all-in and underlying combined ratio

(In millions, except ratios)

GWP ex. 3rd party captives

GWP change (% year over year)

Net written premium

NWP change (% year over year)

Net earned premium

NEP change (% year over year)

Underwriting gain

Loss ratio excl. catastrophes and development Impact of catastrophes

Impact of development-related items

Loss ratio

Expense ratio

Combined ratio

Combined ratio excl. catastrophes and development

Third Quarter

2023

2022

$949

$958

(1)%

$825

$840

(2)%

$829

$810

2 %

$83

$92

58.6 %

58.4 %

- %

0.2 %

(0.6)%

(1.9)%

58.0 %

56.7 %

31.8 %

31.7 %

90.1 %

88.7 %

90.7 %

90.4 %

Year to Date

2023 2022

$2,796

$2,816

(1)%

$2,438

$2,443

- %

$2,438

$2,376

3 %

$237

$273

58.5 %

58.6 %

- %

0.1 %

(0.3)%

(1.4)%

58.2 %

57.3 %

31.9 %

31.0 %

90.3 %

88.5 %

90.6 %

89.8 %

7

Specialty Production Metrics

Rate reductions moderated considerably in Financial Institutions and Management Liability

Specialty Rate & Retention

2022

2023

Q1

Q2

Q3

Q4

Q1

Q2

Q3

84%

85%

88%

88%

88%

89%

87%

Retention

Renewal Premium Change

11%

9%

6%

Rate

3%

4%

2%

10%

7%

5%

-%

3%

2%

(1)%

1%

GWP ex. 3rd party captives

$885

$973

$958

$998

$886

$961

$949

New Business ($M)

$145

$132

$130

$141

$108

$120

$121

FI & Mgmt Liability

Rate

20%

10%

6%

-%

(3)%

(9)%

(4)%

Retention

89%

90%

89%

88%

89%

91%

88%

Affinity Professional E&O

Rate

2%

3%

3%

4%

3%

4%

3%

Retention

90%

90%

91%

92%

88%

89%

89%

Medical Malpractice

Rate

9%

6%

7%

7%

6%

5%

7%

Retention

71%

68%

82%

84%

84%

85%

84%

Surety

Net Written Premiums

$149

$162

$153

$130

$178

$170

$157

Warranty & Alt. Risks

Revenues

$437

$444

$451

$454

$460

$460

$460

8

Commercial

Continued double-digit growth and record underlying combined ratio

(In millions, except ratios)

GWP ex. 3rd party captives

GWP change (% year over year)

Net written premium

NWP change (% year over year)

Net earned premium

NEP change (% year over year)

Underwriting gain (loss)

Loss ratio excl. catastrophes and development Impact of catastrophes

Impact of development-related items

Loss ratio

Expense ratio

Combined ratio

Combined ratio excl. catastrophes and development

Third Quarter

2023

2022

$1,340

$1,184

13 %

$1,071

$962

11 %

$1,170

$1,023

14 %

$13

($23)

61.5 %

61.5 %

7.4 %

10.0 %

- %

- %

68.9 %

71.5 %

29.5 %

29.9 %

98.9 %

101.9 %

91.5 %

91.9 %

Year to Date

2023

2022

$4,384

$3,711

18 %

$3,588

$3,097

16 %

$3,336

$2,901

15 %

$96

$94

61.5 %

61.5 %

5.7 %

5.0 %

(0.2)%

(0.5)%

67.0 %

66.0 %

29.6 %

30.1 %

97.1 %

96.6 %

91.6 %

92.1 %

9

Commercial Production Metrics

New business growth of 19% and rate of 8% which remains above long-run loss cost trend

Commercial Rate & Retention

Retention

Renewal Premium Change

Rate

2022

2023

Q1

Q2

Q3

Q4

Q1

Q2

Q3

87%

87%

86%

86%

86%

85%

83%

8%

9%

9%

11%

9%

7%

7%

5%

5%

4%

5%

7%

8%

8%

GWP ex. 3rd party captives

$1,206

$1,321

$1,184

$1,345

$1,440

$1,604

$1,340

New Business ($M)

$228

$280

$246

$255

$310

$343

$292

Middle Market

Rate

3%

3%

2%

3%

4%

6%

5%

Retention

83%

87%

87%

85%

85%

86%

83%

Construction

Rate

5%

5%

4%

5%

5%

6%

7%

Retention

90%

90%

83%

88%

86%

84%

85%

National Accounts

Rate

11%

10%

8%

11%

17%

20%

18%

Retention

85%

86%

88%

88%

90%

84%

80%

Small Business

Rate

3%

3%

2%

2%

2%

2%

3%

Retention

85%

84%

85%

85%

85%

84%

84%

Marine / Other

Net Written Premium

$72

$101

$82

$78

$87

$101

$78

10

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Disclaimer

CNA Financial Corporation published this content on 27 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2023 10:13:46 UTC.