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CNA Financial Corp. on Monday reported third-quarter net income of $213 million, up from $107 million for the same period in 2019, despite sustaining $160 million in pre-tax net catastrophe losses.
Chicago-based CNA’s property/casualty combined ratio rose to 100.9% in the quarter, compared with 97.6% in the third quarter of 2019. This year’s third-quarter ratio included 8.7 points of catastrophic loss from Hurricanes Laura, Sally and Isaias and the Midwest derecho, CNA said in a statement.
CNA reported net written P/C premiums of $1.82 billion for the quarter, up 7% from the year-earlier period due primarily to non-catastrophe underwriting results and favorable net prior year loss reserve development. The insurer’s commercial line reported a 4% improvement to $804 million, and specialty saw an increase of 9% to $798 million due to strong rate and higher new business.
“We expected only a relatively modest impact from loss frequency benefit because a substantial portion of our portfolio consists of insureds in essential industries such as construction, health care and manufacturing that were not subject to shelter-in-place restrictions,” CNA Chairman and CEO Dino Robusto said in an earnings call. “And we continue to assume a potential for higher severity in casualty lines like auto and general liability as the economy is restored over time, so we believe it’s still early to react too favorably to the short-term trends.”
The insurer’s expense ratio improved to 31.8% in the quarter, compared with 32.5% in the year-earlier period.
“The ability for us to work in this remote environment does generate an ability for us to say, going forward, we think there’s probably going to be less overall travel and expenses,” Mr. Robusto said, but he noted that travel and expenses are not a large component of its underwriting expense ratio.
Mr. Robusto said the insurer continues to feel the impact of social inflation, particularly in its aging services and auto portfolios.
“It’s clear that, as the market continues to harden, we will get a lot of benefits” in terms and conditions beyond pricing, with more restrictive policy terms, higher deductibles and added exclusions.
CNA has experienced losses related to medical malpractice in its aging services line, according to its Q10 filing, though it received fewer claims in the third quarter than in the second, Mr. Robusto said.