CNA CEO pushes rates, drives underwriting profit up
Commercial insurer CNA is succeeding in pushing up rates in most lines apart from workers’ compensation, CEO Dino Robusto said during the insurer’s first quarter 2018 results conference call.
CNA increased net income to $291 million in the first three months of 2018 from $260 million in the same period a year ago. The property/casualty (P&C) operations boosted underwriting gain to $113 million from $43 million over the period. The combined ratio improved to 93.1 percent in the first three months of 2018 from 97.2 percent. Net written premium in P&C grew to $1.81 billion from $1.63 billion over the period.
“Our results in the quarter evidenced our disciplined approach to receiving more rate,” Robusto said. “ In the first quarter, we improved rate of a full point to plus 2 percent, our highest achievement in over two years,” he added.
“Of course, as we push for more rates, we are fully committed to walking away from accounts when we cannot get our required terms and conditions. And in the quarter, we had a trade-off of two points of retention, but still achieved a healthy 83 percent retention ratio,” Robusto noted.
CNA has pushed for rate increases in all business units. In the commercial middle market book, the insurer successfully pushed for more rate on the accounts most in need, specifically, 28 percent of the accounts that renewed in the first quarter received increases of more than 5 percent, which compares with 25 percent in the fourth quarter of 2017, Robusto explained. “This helped drive a full point improvement for middle market rate,” Robusto noted.
Rate for commercial middle market, excluding workers' compensation, was plus 2 percent, also up one point from the prior quarter, Robusto said. For middle market, the workers' compensation decrease was about 3.2 percent, which was expected due to the favourable profitability trends, he noted.
“We have again a lot of profitability in the [workers' compensation] line of business. We're comfortable with the line of business,” Robusto commented.
“We continue to push for more rate in auto and achieved a 5 percent increase, which was up one point from the fourth quarter of 2017,” Robusto said. The push for rate did, however, impact CNA’s commercial middle market retention, which declined by half a point. Middle market retention was further affected as CNA intentionally walked away from a large fully performing programme that the company could not get sufficient rate to make profitable, Robusto said.
In the specialty segment, CNA achieved two points of rate overall, up from one point in the fourth quarter, and retention was down three points to 85 percent, Robusto said. The underwriters continued to execute effectively in pushing for rate where it is needed most, specifically, CNA achieved a 10 percent rate increase in healthcare compared to an 8 percent increase in the fourth quarter of 2017, Robusto said. “March was even better at plus 15 percent,” he noted.
The rate for CNA’s directors and officers’ (D&O) product was up 2 percent for the first quarter as compared to an almost 4 percent decrease in the fourth quarter of 2017. “In order to reverse the negative rate trend, we traded two points of retention compared with the fourth quarter,” Robusto noted.
In CNA’s international segment, rate was 2 percent, up one point from the fourth quarter. “Here as well, we pushed for rate where most needed and achieved a 4 percent rate in our Hardy (CNA Hardy) operation with both property and casualty lines experiencing increases,” Robusto said.
“Based upon our execution, at this more granular level across all our business segments, I remain encouraged by the trajectory of our rate retention efforts and believe that we will be increasingly effective for the remainder of the year,” Robusto noted.
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