By CYRIL TUOHY, managing editor of Risk & Insurance®
Chicago-based CNA Financial Corp.'s turnaround, engineered by Chairman and CEO Thomas F. Motamed, appears to be for real.
The company reported 2010 net income of $690 million on revenues of $9.20 billion, up from 2009 net income of $419 million on revenues of $8.47 billion.
Strong investment earnings due to the Dow up more than 11 percent last year and the absence of big hurricane-related claims contributed to the results, the company also said.
Other possible reasons?
In an interview earlier this year with Risk & Insurance®, Timothy J. Szerlong, CNA's president of worldwide field operations, said that the company had made strides in making it easier for distributors to deal with CNA.
"We surveyed our producer network in 2009 and found consistency and 'ease of doing business' among the most important performance characteristics to be demonstrated by any insurer," Szerlong said. "We also found that we were not faring well against that measure."
That appears to be changing under Motamed and the new senior executives hired or appointed from within over the past 18 months.
Mark Verheyen, senior vice president and chief risk officer, was hired in January; Scott Grieco, vice president of underwriting, small business, was hired in December; and Michael Furlong, vice president of specialty underwriting, was hired last July.
In addition, the company has announced new hirings and promotions among its commercial underwriting officers, branch office leaders and insurance lines executives.
A major revamp of the company's information technology systems has also helped brokers communicate with the carrier more efficiently, while allowing CNA to eliminate 400 information technology-related jobs, the company said.
"The excitement around our strategy to make CNA a distinctive, top performer in the business is apparent both internally and externally," Szerlong said.
It was the company's core property/casualty operations--CNA Specialty and CNA Commercial--which were the shining stars of the company in 2010.
"In 2010, our property/casualty operations produced a combined ratio of 94.8 percent, which equaled our best result in the past 10 years," Motamed said, in a letter to stockholders in the annual report.
He also said the company had sold its Argentine workers' compensation subsidiary for about twice book value. The sale helped generate cash to refocus CNA's core operations on covering risks in Europe and North America, the company said.
Net income in 2010 for CNA Specialty rose to $645 million from $468 million in 2009, and net written premiums rose $7 million last year over the year-ago period. Increases in net written premiums came from professional management and liability lines, the company said in its annual report.
CNA Specialty posted a combined ratio of 85 percent in 2010, up 1.5 points over 2009.
Net income for CNA Commercial rose in 2010 to $494 million from $258 million in 2009, even as net written premiums dropped in 2010 over the prior year by $240 million to $3.20 billion.
Lower premiums were due to decreased insured exposures, particularly in the construction industry affected by smaller payrolls and cancelled or scaled-back construction projects, the company said.
The 2010 combined ratio of 102.9 percent improved by 3.1 points over the previous year, the company said.
For CNA, a "milestone transaction," in the words of Motamed, took place last July when the company paid $2 billion to National Indemnity Co., a Berkshire Hathaway Inc. subsidiary, for the transfer of $1.6 billion in asbestos and environmental pollution liabilities.
"For CNA, transferring risk gives it more certainty," said Brian Schneider, a senior director at Fitch Ratings, who was quoted in a Reuters news dispatch last July.
"The transaction effectively eliminated the overhang from these legacy liabilities and differentiates CNA from a majority of our competitors," said Motamed, in his March stockholder's letter.
The transfer of the asbestos liabilities allowed CNA to cut about 250 out of a total of 650 jobs eliminated in 2010, the company said, as part of a strategy to make the company more efficient and responsive to brokers and buyers.
April 1, 2011
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