CNA’s Robusto says hardening market must continue

Chairman and CEO of US-based international insurance group CNA Financial, Dino Robusto, said the healthy rate increases his firm has secured in recent quarters must be maintained well into 2021 to make up for the long-term negative impact from four years of rate changes below cost trends prior to this hardening market. Mr Robusto’s comments came as he reported “challenging” second-quarter results for CNA Financial that included $182m of Covid-19-related losses, as well as $61m of catastrophe losses caused by recent civil unrest in the US. CNA posted gross written premiums of $2.1bn in the second quarter of this year, compared with $2bn for the same period of 2019. For the first six months of 2020 the total written was $4.2bn, up from $4bn. The second-quarter 2020 combined ratio was 112.3%, against 95.7% during the same period last year. For the first six months of this year it was 104.8%, compared with 96.8% for the same period of 2019. This led to net profit of $151m for the second quarter, compared with $278m for the same period last year. Net profit for the first six months plummeted from $620m in 2019 to $90m in 2020. This was on the back of rising Covid-19, civil unrest and natural catastrophe losses, relatively minor premium volume increases against the backdrop of the economic slowdown, and the continued impact of the long soft market prior to the recent hardening. “The second quarter has been a challenging one as the pandemic continues to impact the lives of all of us. For CNA those challenges have been multifaceted and have impacted our underwriting results considerably,” said Mr Robusto during the group’s analyst call, according to results reporting service Seeking Alpha. “As we also indicated in our pre-announcement, we incurred $61m of catastrophe losses due to the civil unrest events. In addition, we had $58m in losses due to the severe weather storms. On a combined basis, these three categories of catastrophes added 17.5 points to our second-quarter loss ratio,” he added. Mr Robusto stressed that, given the wider economic backdrop and impact of Covid-19, there is a strong need to maintain rate-hardening momentum. “Rate increases continued to accelerate as we achieved plus 11% in P&C overall, up three points from the first quarter, and 11% is inclusive of workers’ comp, which had slightly negative rates,” he said. “Importantly, increases were broad-based as each business unit achieved higher rates. In light of our written rate increases over the last four quarters, earned rate increases are now 7%, which are clearly above our long-run loss cost trends of 4%,” continued Mr Robusto. “But as I have said before, we need to sustain this… for several more quarters before we would favourably adjust our current accident-year selections, because we experienced almost four years of rate changes below long-run cost trends prior to this hardening market,” he added. Mr Robusto said the group’s ongoing re-underwriting of its international business has made good progress, and will be complete by the end of the third quarter, after which it can look forward to resuming growth.

CNA’s Robusto says hardening market must continue

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