Exhibit 99.1
[CNA LOGO]
FOR IMMEDIATE RELEASE
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CONTACT:
MEDIA: ANALYSTS:
Charles M. Boesel, 312/822-2592 Dawn M. Jaffray, 312/822-7757
Katrina W. Parker, 312/822-5167 Kenneth S. De Vries, 312/822-1111
CNA FINANCIAL ANNOUNCES
1ST QUARTER RESULTS
CHICAGO, MAY 3, 2005 --- CNA Financial Corporation (NYSE: CNA) today announced
first quarter of 2005 results, which included the following items:
- Net income for the first quarter of 2005 of $178 million as compared
to net loss of $124 million for the same period in 2004.
- Income before net realized investment losses for the first quarter of
2005 of $192 million as compared to $209 million for the same period
in 2004.
- Property and Casualty combined ratio of 99.0%.
- CNA will restate its financial results for prior years to correct its
accounting for several reinsurance contracts, primarily with a former
affiliate, and its equity accounting for that affiliate. The Company
will file a Form 10-K/A for 2004 reflecting the effects of the
restatement, which will reduce stockholders' equity as of December 31,
2004 by $29 million, or 0.3%. The revised accounting increased net
income for the three months ended March 31, 2005 by $2 million and
increased earnings per share by $0.01.
<Table>
<Caption>
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RESULTS FOR THE THREE MONTHS ENDED
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MARCH 31
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($ MILLIONS, EXCEPT PER SHARE DATA) 2005 2004
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(Restated)
INCOME BEFORE NET REALIZED INVESTMENT LOSSES $ 192 $ 209
NET REALIZED INVESTMENT LOSSES (14) (333)
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NET INCOME (LOSS) $ 178 $(124)
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NET INCOME (LOSS) PER SHARE RESULTS AVAILABLE TO COMMON STOCKHOLDERS (a)(b) $0.63 $(0.55)
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</Table>
(a) Included in the weighted average number of common shares are the effects of
additional common stock issued related to the November of 2003 sale of $750
million of convertible preferred shares to Loews Corporation. The effect of
the preferred shares has been included in the weighted average shares since
issuance. The preferred shares converted into 32,327,015 shares of CNA
common stock on April 20, 2004.
(b) The three months ended March 31, 2005 and 2004 per share results available
to common stockholders are reduced by $17 million and $16 million, or $0.07
per share and $0.06 per share, of undeclared preferred stock dividends.
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Net income for the three months ended March 31, 2005 increased $302 million as
compared with the same period in 2004, primarily due to improved net realized
investment results. First quarter of 2004 net results included an after-tax
impairment loss of $406 million related to the sale of CNA's individual life
business. Also favorably impacting the first quarter of 2005 net results were
decreased provisions for insurance and reinsurance bad debt of $32 million
after-tax and improved operating expenses. These improvements were offset by
increased unfavorable net prior year development of $45 million after-tax and
reduced investment income. The Property and Casualty Operations produced a
combined ratio of 99.0% in the first quarter of 2005.
"In the first quarter of 2005, CNA continued the controlled orderly execution
that marked our performance last year" said Steve Lilienthal, Chairman and Chief
Executive Officer of the CNA insurance companies. "Our core Property & Casualty
Operations business is holding the line on underwriting discipline in an
environment of moderating pricing. Property & Casualty Operations has now
recorded six consecutive quarters of combined ratios under 100% before the
impact of catastrophe losses in the third quarter of 2004. Meanwhile, our runoff
operations continue to perform as expected."
Net realized investment losses were $14 million for the three months ended March
31, 2005 as compared with net realized investment losses of $333 million for the
same period in 2004. The improvement was primarily due to the impairment loss
recorded in 2004 described above. This was partly offset by decreased results in
the first quarter of 2005 from the fixed maturity securities portfolio and a $9
million after-tax impairment loss related to loans made under a credit facility
to a national contractor.
<Table>
<Caption>
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SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2005
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STANDARD SPECIALTY TOTAL P&C LIFE & GROUP CORPORATE
& OTHER
($ MILLIONS) LINES LINES OPS. NON-CORE NON-CORE TOTAL
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INCOME (LOSS) BEFORE NET REALIZED
INVESTMENT GAINS (LOSSES) $ 101 $ 79 $ 180 $ 1 $ 11 $ 192
NET REALIZED INVESTMENT GAINS (LOSSES) (8) 3 (5) (3) (6) (14)
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NET INCOME (LOSS) $ 93 $ 82 $ 175 $ (2) $ 5 $ 178
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</Table>
<Table>
<Caption>
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SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2004
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STANDARD SPECIALTY TOTAL P&C LIFE & GROUP CORPORATE
& OTHER
($ MILLIONS) LINES LINES OPS. NON-CORE NON-CORE TOTAL
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INCOME BEFORE NET REALIZED INVESTMENT
GAINS (LOSSES) $ 114 $ 75 $ 189 $ 19 $ 1 $ 209
NET REALIZED INVESTMENT GAINS (LOSSES) 38 13 51 (401) 17 (333)
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NET INCOME (LOSS) $ 152 $ 88 $ 240 $(382) $ 18 $(124)
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</Table>
<Table>
<Caption>
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PROPERTY & CASUALTY OPERATIONS GROSS WRITTEN PREMIUMS
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THREE MONTHS ENDED MARCH 31
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($ MILLIONS) 2005 2004
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STANDARD LINES $1,516 $1,565
SPECIALTY LINES 769 710
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TOTAL P&C OPERATIONS $2,285 $2,275
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</Table>
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<Table>
<Caption>
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PROPERTY & CASUALTY OPERATIONS NET WRITTEN PREMIUMS
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THREE MONTHS ENDED MARCH 31
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($ MILLIONS) 2005 2004
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STANDARD LINES $1,171 $1,265
SPECIALTY LINES 594 581
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TOTAL P&C OPERATIONS $1,765 $1,846
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</Table>
<Table>
<Caption>
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PROPERTY & CASUALTY CALENDAR YEAR LOSS RATIOS
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THREE MONTHS ENDED MARCH 31
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2005 2004
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STANDARD LINES 71.0% 65.5%
SPECIALTY LINES 62.3 63.1
TOTAL P&C OPERATIONS 68.1 64.8
TOTAL P&C COMPANIES (a) 74.6% 71.3%
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</Table>
(a) P&C Companies includes Standard Lines, Specialty Lines and P&C business
written in Life and Group Non-Core and Corporate and Other Non-Core,
including CNA Re and asbestos, environmental pollution and mass tort
exposures.
<Table>
<Caption>
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PROPERTY & CASUALTY CALENDAR YEAR COMBINED RATIOS
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THREE MONTHS ENDED MARCH 31
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2005 2004
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STANDARD LINES 103.7% 99.7%
SPECIALTY LINES 89.4 89.9
TOTAL P&C OPERATIONS 99.0 96.8
TOTAL P&C COMPANIES (a) 106.4% 103.6%
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</Table>
(a) P&C Companies includes Standard Lines, Specialty Lines and P&C business
written in Life and Group Non-Core and Corporate and Other Non-Core,
including CNA Re and asbestos, environmental pollution and mass tort
exposures.
<Table>
<Caption>
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PROPERTY & CASUALTY GROSS ACCIDENT YEAR LOSS RATIOS
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ACCIDENT YEAR 2005 ACCIDENT YEAR 2004 ACCIDENT YEAR 2004
EVALUATED AT EVALUATED AT EVALUATED AT
MARCH 31, 2005 DECEMBER 31, 2004 MARCH 31, 2005
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STANDARD LINES 63.0% 67.2% 65.5%
SPECIALTY LINES 59.9 64.1 59.6
TOTAL P&C OPERATIONS 62.0% 66.3% 63.7%
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</Table>
<Table>
<Caption>
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PROPERTY & CASUALTY NET ACCIDENT YEAR LOSS RATIOS
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ACCIDENT YEAR 2005 ACCIDENT YEAR 2004 ACCIDENT YEAR 2004
EVALUATED AT EVALUATED AT EVALUATED AT
MARCH 31, 2005 DECEMBER 31, 2004 MARCH 31, 2005
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STANDARD LINES 64.4% 69.2% 68.1%
SPECIALTY LINES 59.0 63.5 59.7
TOTAL P&C OPERATIONS 62.5% 67.4% 65.4%
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</Table>
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BUSINESS OPERATING HIGHLIGHTS
STANDARD LINES includes standard property and casualty coverages sold to small
and middle market commercial businesses primarily through an independent agency
distribution system, and excess and surplus lines, as well as insurance and risk
management products sold to large corporations.
- - Net written premiums decreased $94 million for the first quarter of 2005 as
compared with the same period in 2004, primarily due to lower new business
in a more competitive marketplace, and decreased retention principally in
large account business, heavily driven by workers compensation.
Specifically impacting retention were intentional underwriting actions
primarily within unprofitable lines of business.
- - Standard Lines rate was flat during the first quarter of 2005.
- - Net income for the first quarter of 2005 decreased $59 million as compared
with the same period in 2004, primarily due to decreased net realized
investment results. First quarter of 2005 results were also adversely
impacted by increased unfavorable net prior year development, primarily in
excess and surplus lines, partially offset by a decrease in the bad debt
provision for insurance and reinsurance receivables, improved current
accident year results and lower operating expenses.
SPECIALTY LINES provides a broad array of professional, financial and specialty
property and casualty products and services.
- - Net written premiums increased $13 million for the first quarter of 2005 as
compared with the same period in 2004, primarily due to rate and increases
in retention in the professional liability lines of business.
- - Specialty Lines achieved average rate increases during the first quarter of
2005 of 2.0%, primarily across professional liability lines.
- - Net income for the first quarter of 2005 decreased $6 million as compared
with the same period in 2004, primarily due to decreased net realized
investment results. First quarter of 2005 results were also impacted by
increased net prior year development, primarily in the directors and
officers line, and decreased investment results. These items were partly
offset by improved current net accident year loss ratios.
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LIFE AND GROUP NON-CORE primarily includes the results of the life and group
lines of business that have been sold or placed in run-off. The Group Benefits
business was sold on December 31, 2003 and the Individual Life business was sold
on April 30, 2004.
- - Net earned premiums decreased $160 million for the first quarter of 2005 as
compared with the same period in 2004, due primarily to the absence of
premiums from the Individual Life business. Net earned premiums for this
business in the first quarter of 2004 were $105 million. Additionally,
decreased premiums from the specialty medical and structured settlement
businesses contributed to the decline in earned premiums.
- - Net results for the first quarter of 2005 increased $380 million as
compared with the same period in 2004. The improvement is primarily due to
an after-tax impairment loss recorded in the first quarter of 2004 of $406
million related to the then pending sale of the individual life insurance
business. Additionally, improved results from the life settlement contract
business contributed to the improvement in net results. These improvements
were partially offset by the absence of favorable results from the sold
individual life business excluding the impact of the impairment loss
described above.
CORPORATE AND OTHER NON-CORE contains certain corporate expenses such as
interest on corporate debt, and losses and expenses related to the centralized
adjusting and settlement of asbestos, environmental pollution and mass tort
claims. In addition, this segment includes the results of certain property and
casualty insurance run-off operations, including CNA Re.
- - Net results for the first quarter of 2005 decreased $13 million as compared
with the same period in 2004, primarily due to decreased earned premiums
and lower investment results. These items were partly offset by a decrease
in the provision for reinsurance receivables as compared with the same
period in 2004.
NET INVESTMENT INCOME
Pretax investment income decreased $69 million to $406 million for the first
quarter of 2005 as compared with the same period in 2004. This decline is due to
reduced investment income from the trading portfolio, and reduced fixed maturity
investment income which relates largely to the sale of CNA's individual life
business. These declines were partly offset by improved results from short term
investments and limited partnerships, in addition to reduced interest expense on
funds withheld and other deposits. While the reduced trading portfolio income
decreased net investment income, this was offset by a corresponding reduction in
certain policyholder funds supported by the trading portfolio.
FINANCIAL RESTATEMENT
CNA will restate its financial results for prior years to correct its accounting
for several reinsurance contracts, primarily with a former affiliate, and its
equity accounting for that affiliate. The impact of this revised accounting
results in a reduction to stockholders' equity as of December 31, 2004 of $29
million, or 0.3% and a decrease in net loss for the three months ended March 31,
2004 of $1 million, or 0.8%. The net loss adjustment has no impact on loss per
share for the three months ended March 31, 2004.
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The Company will file a Form 10-K/A for 2004 reflecting the effects of the
restatement as follows:
<Table>
<Caption>
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RESTATED RESULTS AS OF AND FOR THE YEARS ENDED DECEMBER 31,
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2004 2003 2002
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($ MILLIONS, EXCEPT PER SHARE DATA) AS AS RESTATED AS AS RESTATED AS RESTATED
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AS
PREVIOUSLY PREVIOUSLY PREVIOUSLY
REPORTED REPORTED REPORTED
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STOCKHOLDERS' EQUITY $ 9,207 $ 9,178 $ 8,952 $ 8,918 $ 9,401 $ 9,354
NET INCOME (LOSS) 441 446 (1,433) (1,419) 155 171
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BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE AVAILABLE TO COMMON STOCKHOLDERS: $ 1.47 $ 1.49 $ (6.58) $ (6.52) $ 0.68 $ 0.76
==================================================================================================================================
</Table>
This restatement is based upon reconsideration of the Company's accounting for
its former equity interest in Accord Re Ltd. (Accord) and for several
reinsurance contracts with Accord, but also includes two reinsurance agreements
with unaffiliated parties that are immaterial in the aggregate. A subsidiary of
The Continental Corporation (TCC) acquired a 49% ownership interest in Accord, a
Bermuda company, in 1989 upon Accord's formation. TCC also provided capital
support to Accord through a guarantee from a TCC subsidiary. TCC was acquired by
the Company in 1995.
Reinsurance relationships with Accord involved both property and casualty
assumed reinsurance risks that were written by TCC subsidiaries and 100% ceded
to Accord or reinsured from other cedents by Accord. Stop-loss protection in
relation to those risks was obtained by Accord from a wholly-owned TCC
subsidiary.
All of the Company's reinsurance agreements with Accord relating to property
risks were commuted as of year-end 2001, leaving six reinsurance agreements with
Accord relating to casualty risks outstanding at that time. As of March 31, 2005
the Company provides no capital support to and has no ownership interest in
Accord. During the period of the Company's minority ownership Accord also
maintained reinsurance relationships with reinsurers unaffiliated with the
Company.
As previously reported the Company continues to respond to various subpoenas,
interrogatories and other requests for information received from state and
federal regulatory authorities relating to on-going insurance industry
investigations of non-traditional insurance products, including finite
reinsurance. As also previously reported, the Company agreed to undergo a state
regulatory financial examination of Continental Casualty Company and its
insurance subsidiaries as of December 31, 2003. Such review includes examination
of certain of the finite reinsurance contracts entered into by the Company and
whether such contracts possess sufficient risk transfer characteristics
necessary to qualify for accounting treatment as reinsurance. In the course of
complying with these requests the Company conducted a comprehensive review of
its finite reinsurance relationships, including contracts with Accord. It is
possible that the Company's analyses of, or accounting treatment for, other
finite reinsurance contracts could be questioned or disputed in the context of
the referenced state regulatory examination, and further restatements of the
Company's financial results are possible as a
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consequence, which could have a material adverse impact on the Company's
financial condition.
ABOUT THE COMPANY
CNA is the country's seventh largest commercial insurance writer and the 14th
largest property and casualty company. CNA's insurance products include standard
commercial lines, specialty lines, surety, marine and other property and
casualty coverages. CNA's services include risk management, information
services, underwriting, risk control and claims administration. For more
information, please visit CNA at www.cna.com. CNA is a registered service mark,
trade name and domain name of CNA Financial Corporation.
CONFERENCE CALL AND WEBCAST INFORMATION:
A CONFERENCE CALL FOR INVESTORS AND THE PROFESSIONAL INVESTMENT COMMUNITY WILL
BE HELD FROM 10:00 A.M. TO 11:00 A.M. ET TODAY. ON THE CONFERENCE CALL WILL BE
STEPHEN W. LILIENTHAL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE CNA INSURANCE
COMPANIES, AND OTHER MEMBERS OF SENIOR MANAGEMENT. PARTICIPANTS CAN ACCESS THE
CALL BY DIALING (800) 478-6251 OR FOR INTERNATIONAL CALLERS (913) 981-5558. THE
CALL WILL ALSO BE BROADCAST LIVE ON THE INTERNET AT HTTP://INVESTORS.CNA.COM OR
YOU MAY GO TO THE INVESTOR RELATIONS 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 ON CNA'S WEBSITE THROUGH MAY 10, 2005. THE REPLAY CAN ALSO BE
ACCESSED BY DIALING (888) 203-1112 OR FOR INTERNATIONAL CALLERS (719) 457-0820
AND USING PASSCODE 9033425. FINANCIAL SUPPLEMENT INFORMATION RELATED TO THE
FIRST QUARTER RESULTS IS AVAILABLE ON THE INVESTOR RELATIONS PAGES OF THE CNA
WEBSITE OR BY CONTACTING KEN DE VRIES AT (312) 822-1111.
FORWARD-LOOKING STATEMENT
This press release includes statements which relate to anticipated future events
(forward-looking statements) rather than actual present conditions or historical
events. You can identify forward-looking statements because generally they
include words such as "believes", "expects", "intends", "anticipates",
"estimates", and similar expressions. Forward-looking statements, by their
nature, are subject to a variety of inherent risks and uncertainties that could
cause actual results to differ materially from the results projected. Many of
these risks and uncertainties cannot be controlled by CNA. For a detailed
description of these risks and uncertainties please refer to CNA's filings with
the Securities and Exchange Commission, available at www.cna.com.
Any forward-looking statements made in this press release are made by CNA as of
the date of this press release. CNA does not have any obligation to update or
revise any forward-looking statement contained in this press release, even if
CNA's expectations or any related events, conditions or circumstances change.
In evaluating the results of the Standard Lines and Specialty Lines, management
utilizes the combined ratio, the loss ratio, the expense ratio, and the dividend
ratio. These ratios are calculated using accounting principles generally
accepted in the United States of America (GAAP) financial results. The loss
ratio is the percentage of net incurred claim and claim adjustment expenses to
net earned premiums. The expense ratio is the percentage of underwriting and
acquisition expenses, including the amortization of deferred acquisition costs,
to net earned premiums. The dividend ratio is the ratio of dividends incurred to
net earned premiums. The combined ratio is the sum of the loss, expense and
dividend ratios.
This press release may also contain financial measures that are not in
accordance with GAAP. For reconciliations of non-GAAP measures to the most
comparable GAAP measures, refer to this press release and the financial
supplement posted on the Company's website.
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