Cna Financial Corporation · NYSE:CNA
Cna Financial — Q3 2020 Earnings Presentation
22 slides from Cna Financial's earnings presentation, Nov 2, 2020
Slide 1: Third Quarter 2020 Results
CNA Financial Corporation Third Quarter 2020 Results November 2, 2020
Slide 2: Notices and Disclaimers
Notices and Disclaimers Forward Looking Statements The statements made in the course of this presentation and/or contained in the presentation materials may include statements that relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical ev
Slide 3: Third Quarter Overview
Third Quarter Overview • Net income of $213 million or $0.79 per share; Core income of $193 million or $0.71 per share. • Net and core income includes an LTC GPV charge of $59 million after-tax primarily driven by actions taken on discount rate assumptions. • Catastrophe losses of $160 million preta
Slide 4: Financial Performance
Financial Performance Q3 Core income of $193M reflects strong Net investment income and underlying underwriting performance offset by catastrophe losses and LTC charge. (In millions, except ratios and per share data) Third Quarter Year to Date 2020 2019 Change 2020 2019 Change Revenues $2,820 $2,685
Slide 5: Property & Casualty Operations
Property & Casualty Operations Underlying combined ratio of 92.6% is the lowest in over a decade. Combined ratio of 100.9% includes 8.7 points of catastrophe loss impact, related primarily to severe weather related events. Top line results reflect continued premium growth and rate momentum. (In mill
Slide 6: Specialty
Specialty Results reflect very strong growth and continued strong underwriting performance. (In millions, except ratios) Third Quarter Year to Date 2020 2019 2020 2019 GWP ex. 3rd party captives $861 $778 $2,413 $2,263 GWP change (% year over year) 11 % 7% Net written premiums $795 $732 $2,231 $2,14
Slide 7: Specialty Production Metrics
Specialty Production Metrics Rates continue to increase while maintaining strong retention. New business growth also strong at +14%. Specialty Rate & Retention 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Rate Retention 89% 89% 87% 86% 86% 85% 84% 9% 11% 13% 4% 6% 8% 3% GWP ex. 3rd party captives ($M) $730 $755 $
Slide 8: Commercial
Commercial Strong underlying performance and solid growth. Combined ratio of 111.5% includes 17.0 points of catastrophe loss impact, primarily due to severe weather related events. (In millions, except ratios) Third Quarter Year to Date 2020 2019 2020 2019 GWP ex. 3rd party captives $915 $852 $3,018
Slide 9: Commercial Production Metrics
Commercial Production Metrics Rates continue to accelerate. Retention was impacted by targeted re-underwriting actions. Commercial Rate & Retention 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Rate Retention 86% 87% 86% 87% 85% 84% 81% 8% 10% 11% 2% 3% 4% 5% GWP ex. 3rd party captives ($M) $933 $958 $852 $867 $1,
Slide 10: International
International Impact of re-underwriting efforts leads to strong positive growth and improved underwriting results. (In millions, except ratios) Third Quarter Year to Date 2020 2019 2020 2019 Gross written premiums $238 $226 $822 $837 GWP change (% year over year) 5% (2)% Net written premiums $222 $2
Slide 11: Life & Group Segment - Overview
Life & Group Segment - Overview Significant progress in reducing the risk profile of LTC block Consistent 31% decline in active policies since 2015 Active Management Focused rate increase strategies are making an impact Approach Responsible & proactive reserving approach reduces future capit
Slide 12: Long Term Care Block Characteristics
Long Term Care Block Characteristics Mature Individual block with an average attained age of 80; Group block has more basic benefit features. 1 Individual Block Group Block # of Active Lives 140k 148k Policyholders Average Age 80 years old 66 years old # of Open Claims 14.7k 3.0k Claims Average Age
Slide 13: LTC Progress Focused on Active Management
LTC Progress Focused on Active Management Proactive approach to managing block across all dimensions of the business; well positioned to advance de-risking. Timeline 2016 2017 2018 2019 2020 • GLTC block closed • Initiated differentiated risk • Removed morbidity • Introduced benefit • Normative risk
Slide 14: Current Discount Rate Assumption
Current Discount Rate Assumption Responsible & proactive reserving approach reduces future capital and earnings at risk. • Normative risk free rate (based on 10-year U.S. Treasury) reduced by 100bps (205bps reduction over the past 3 years) • Updated normative risk free rate of 2.75% • Grade-in perio
Slide 15: Current Discount Rate Assumption
Current Discount Rate Assumption Decrease in the normative risk free rate of 100bps in 2030 and ~200bps reduction between 2022 and 2026. The 10-year U.S. Treasury is projected to get back to 2.00% in 2027. 4.00% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75% 3.48% 3.50% 2019 3.21% 100bps 2.94
Slide 16: Other Key LTC Assumption Changes
Other Key LTC Assumption Changes • Morbidity cost of care assumption revised to reflect lower inflation environment • Mortality assumptions updated to reflect increased mortality rates at older ages; refined attribution of policy terminations between lapse and mortality supportive of revised assumpt
Slide 17: 2020 L&G Annual Reserve Review Summary
2020 L&G Annual Reserve Review Summary Significant actions on LTC discount rate assumptions, leading to GAAP reserve strengthening of $74M; 5th consecutive year of favorable LTC claim development. (In millions) Active Life Reserve Margin at September 30, 2019: $0 Discount Rate Normative risk free
Slide 18: Life & Group
Life & Group Results include adverse impact of annual reserve reviews partially offset by favorable operating results, driven by morbidity experience. (In millions) Third Quarter Year to Date 2020 2019 2020 2019 Net earned premiums $127 $130 $380 $390 Net investment income 208 207 622 616 Other reve
Slide 19: Financial Strength
Financial Strength Balance Sheet remains strong; significant increase in operating cash flow. Sep 30, Dec 31, Capital (In millions, except per share data) 2020 2019 • Continue to maintain strong capital structure Debt $2,776 $2,679 • Capital remains above target levels required Stockholders' equity
Slide 20: Liquidity Profile
Liquidity Profile Strong liquidity and cash flow at both the holding company and operating company levels. Holding Co. Liquidity & Obligations Operating Company Liquidity 1 $M $b $1.8 As of Sep 30, 2020 2020 Operating company dividend capacity $1,078 $1.2 $1.3 Less: Last twelve months dividends (980
Slide 21: Investment Portfolio
Investment Portfolio Diversified and liquid investment portfolio. Net Highlights Unrealized September 30, 2020 Carrying Value G/(L) • High-quality portfolio with an average credit rating of “A” Asset Class ($M) $ % $ • Liquidity supports underlying liability Investment Grade Corp 21,597 44 % 2,931 c
Slide 22: Pretax Net Investment Income
Pretax Net Investment Income Limited partnership and common stock income now positive for the year after Q1 market disruption; fixed income contributions remain modestly lower as reinvestment rates decline. $M $487 $545 $329 $534 $517 $12 $7 $10 $3 Highlights $69 $5 $84 $18 $71 • Q3 2020 limited par