CNA Financial Corporation — 2023 Form 10-K
Business and reporting period. CNA is an insurance holding company whose principal business is commercial property and casualty insurance, including surety. It reports Specialty, Commercial, International, Life & Group, and Corporate & Other segments. Loews Corporation owned approximately 92% of CNA’s common stock at December 31, 2023. This filing covers the fiscal year ended December 31, 2023; comparative figures are for 2022 unless noted.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenues | $13.299 billion | $11.879 billion |
| Net earned premiums | $9.480 billion | $8.667 billion |
| Net investment income | $2.264 billion | $1.805 billion |
| Net income | $1.205 billion | $682 million |
| Diluted EPS | $4.43 | $2.51 |
| Core income (non-GAAP) | $1.284 billion | $836 million |
| Operating cash flow | $2.285 billion | $2.502 billion |
- Total revenues increased about 12%; net income increased about 77%. Core income rose $448 million, reflecting stronger Property & Casualty results and a smaller Life & Group loss.
- Property & Casualty underwriting remained profitable. Combined ratios were 90.4% for Specialty, 96.0% for Commercial, and 92.6% for International; below 100% indicates an underwriting gain. Commercial improved from 97.3%, while Specialty and International worsened from 88.6% and 91.8%, respectively.
- Net prior-year reserve development was unfavorable by $48 million in 2023, versus favorable development of $32 million in 2022. Net catastrophe losses were $236 million, compared with $247 million.
- At year-end, total assets were $64.711 billion, stockholders’ equity $9.893 billion, and investments $46.562 billion. Debt was $3.031 billion: $550 million classified as short-term and $2.481 billion long-term. Cash was $345 million.
- Net cash from operations declined $217 million, mainly from higher claim payments—including $193 million of long-term-care policy buyouts—and higher operating expenses, partly offset by increased premiums collected. Financing cash use included $787 million of common dividends; CNA issued $500 million of 5.50% notes due 2033 and repaid $243 million of debentures.
- Management said cash flows were sufficient for expected working-capital and debt needs. No borrowings were outstanding under the $250 million revolving facility or from the Federal Home Loan Bank of Chicago. CCC paid CNAF $1.055 billion in dividends in 2023; insurance-subsidiary distributions are subject to regulatory limits.
Material changes, outlook, and risks
- Higher fixed-income and limited-partnership returns drove investment income growth. The fixed-income portfolio’s effective income yield increased to 4.7% from 4.4%.
- Life & Group, principally run-off long-term-care business, reported a $48 million core loss, improving from a $221 million loss. The long-term-care future-policy-benefit reserve was $13.959 billion. 2023 assumption updates increased the reserve by $8 million pretax; the comparable 2022 update increased it by $186 million.
- CNA adopted the long-duration-contract accounting standard (LDTI) using a modified retrospective approach. It materially changed reported long-term-care reserves and prior-period results, but the company said adoption did not change statutory capital and surplus, cash flows, or the underlying economics of the business.
- Management provided no specific earnings or revenue guidance. It stated that current liquidity should meet near-term needs. The Board declared a $0.44-per-share quarterly dividend and a $2.00-per-share special dividend in February 2024, payable in March, subject to the company’s capacity and regulatory constraints.
- Key exposures include reserve uncertainty—especially long-tail casualty, long-term care, asbestos and environmental claims, and legacy mass tort claims—plus social and medical inflation, abuse-claim revival statutes, catastrophe and climate-related losses, reinsurance recoverability, investment-market volatility, commercial real estate credit, and cyber risk. CNA reported unfavorable legacy mass-tort development and disclosed prior cybersecurity incidents, including a 2023 MOVEit-related vendor breach notification to long-term-care policyholders.
- The 2010 asbestos and environmental loss portfolio transfer to NICO has a $4 billion limit; cumulative cessions were $3.6 billion at year-end. The filing also identifies uncertainty around long-term-care assumptions and premium increases requiring regulatory approval.
- A $24 million pretax office-consolidation charge was recorded in 2023. CNA anticipated a further approximately $16 million pretax charge in 2024. The filing reported stable outlooks from A.M. Best, Moody’s, S&P, and Fitch; statutory capital and surplus for CCC was 225% of company-action-level risk-based capital at year-end.
Important facts for investors to verify
- Whether casualty reserve development, claim severity, social inflation, and mass-tort activity continue to put pressure on reserves and underwriting results.
- Whether long-term-care morbidity, persistency, premium-rate approvals, and discount-rate changes support the reported $13.959 billion reserve and statutory margin.
- Catastrophe exposure, reinsurance limits and counterparty collateral, including the remaining capacity of the NICO loss portfolio transfer.
- Liquidity and holding-company dividend capacity, including the $550 million debt maturity in 2024 and regulatory limits on subsidiary dividends.
- Investment portfolio credit and valuation risks, particularly unrealized fixed-income losses, commercial real estate exposures, and the liquidity of limited partnerships.
- The effects of the LDTI accounting change when comparing 2023 with earlier reported results; the filing states prior periods were adjusted.
The financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting. The auditor identified property-and-casualty claim reserves and long-term-care future-policy-benefit reserves as critical audit matters.