CNA Financial’s international business, which includes its UK and European operations, posted strong third-quarter results, even as the US commercial insurer’s domestic margins came under pressure.
The International segment’s combined ratio improved to 86.1% from 91.8%, helped by 10.1 points of favourable prior-year reserve development. Net written premiums rose 4%, or 6% excluding currency movements. Underlying performance was weaker. The underlying loss ratio rose 1.3 points across most lines and the expense ratio rose 1.6 points on higher acquisition costs, taking the underlying combined ratio to 94.1%.
CNA said it is cutting rates in its International segment, as well as in US property and workers’ compensation.
Across CNA’s property and casualty business, the combined ratio rose to 97.0% from 92.8%. The underlying loss ratio rose 2.2 points to 64.1%, with increases in every segment, while written rate rose just 2%.
CNA’s US Commercial segment came close to breaking even, with a combined ratio of 99.7%, up 7 points. Catastrophe losses, adverse reserve development and higher losses in excess casualty and workers’ compensation drove the increase.
“There are areas across many portions of the portfolio where we chose to walk away given current market conditions do not support appropriate pricing, terms and conditions,” said Douglas Worman, chairman and chief executive.
Net income fell to $196 million from $403 million, partly because of a $137 million after-tax long-term care reserve charge in CNA’s run-off life business.
For brokers in London and the UK, CNA’s International growth and rate cuts reflect a competitive market. Brokers placing UK and European commercial and specialty business may find CNA Hardy keen to grow, particularly in lines where pricing has softened.
The US results are a warning, though. Rising excess casualty losses in the US matter for London market underwriters, many of whom write US casualty through Lloyd’s and the wholesale market. If a large US carrier is seeing loss trends deteriorate, London capacity for US casualty is likely to stay disciplined, especially on excess layers.
Brokers should also note that CNA’s International result was helped by reserve releases. Underlying margins are narrowing, which suggests rate cuts in the UK and Europe may not continue indefinitely.
