A number of insurers have begun to release their financial results for Q3 2010. The following is a compilation of their announcements:
Aon Corp. reported results for the third quarter ended Sept. 30, 2010. The company says its total revenue was similar to the prior year quarter at $1.8 billion due to a 2% increase from acquisitions, primarily Allied North America, net of dispositions, offset by a 1% decrease from foreign currency translation and a 6% decline in fiduciary investment income.
Aon reported its total operating expenses decreased 4% or $62 million to $1.5 billion due primarily to a $91 million decrease in restructuring related expenses, benefits related to the 2007 and Aon Benfield restructuring programs and an estimated $30 million favorable impact from foreign currency translation, partially offset by the inclusion of operating expenses related to recent acquisitions and $19 million of costs associated with the merger of Hewitt with Aon Consulting.
The net income attributable to Aon stockholders was $144 million or $0.51 per share, compared to $120 million or $0.41 per share for the prior year quarter. Net income attributable to Aon stockholders from continuing operations increased 23% to $144 million or $0.51 per share, compared to $117 million or $0.40 per share for the prior year quarter. Net income per share attributable to Aon stockholders from continuing operations, excluding certain items, decreased 6% to $0.61 compared to $0.65 for the prior year quarter.
"Our third-quarter results reflect solid operational performance against a challenging global economy," says Greg Case, president and CEO. "We delivered four percent organic revenue growth and a 150 basis point increase in margin in our Consulting segment and continued to improve the run-rate of organic revenue in our retail Brokerage business. Our GRIP platform, Aon Broking initiatives and benefits related to the restructuring programs are expected to deliver long-term growth and significant margin improvement in our Brokerage segment. We also are excited about the recently completed merger of Hewitt with Aon Consulting, which substantially strengthens our position as the preeminent global professional services firm focused on risk and people. Aon Hewitt's senior leadership team is fully in place, the integration is well underway and support from clients around the globe has been exceptional."
CNA Financial Corp. announced Q3 2010 results, which included a net operating loss of $158 million, and net loss of $140 million. Third-quarter 2010 results included an after-tax net loss of $365 million related to the previously announced agreement to cede Asbestos and Environmental Pollution liabilities to National Indemnity Co. (Loss Portfolio Transfer or LPT); $344 million was recognized in continuing operations and $21 million was recognized in discontinued operations.
CNA announced that its P&C operations combined ratio for the third quarter was 97.9%. Book value per common share was $42.76 at Sept. 30, 2010, as compared to $40.43 at June 30, 2010 and $35.91 at Dec. 31, 2009.
Additionally, CNA's net operating results for the three months ended Sept. 30, 2010 decreased $489 million as compared with the same period in 2009. Excluding the loss associated with the asbestos loss portfolio transfer, net operating income decreased $145 million. Net operating income for the company's core property/casualty operations decreased $19 million as they were unfavorably affected by lower net investment income.
"We are pleased to report another quarter of steady performance and continued focus on our profit-improvement strategies," says Thomas Motamed, CNA's chairman and CEO. "Operating income before the impact of the loss portfolio transfer was $186 million. Our property & casualty operations combined ratio was 97.9%. Rates on our renewal business were slightly negative, however, retention remained strong and we wrote more new business than we lost. CNA's balance sheet and capital position remain very strong. Our book value per common share increased 19% to $42.76 from year-end 2009. We are also very pleased to have completed the loss portfolio transfer. We believe the transaction enhances CNA's financial stability by substantially eliminating our exposures to legacy asbestos and pollution liabilities."
CNO Financial Group Inc., the holding company for Bankers Life and Casualty Co., Colonial Penn Life Insurance Co. and Washington National Insurance Co., announced its results for Q3 2010.
CNO said its net income increased to $49.4 million, compared to $15.4 million in Q3 2009 (including $2.3 million of net realized investment gains in Q3 2010 vs. $38.9 million of net realized investment losses and valuation allowance for deferred tax assets in Q3 2009).
The holding company's net income per diluted share of 17 cents, compared to 8 cents in Q3 2009 (reflecting dilution of 2 cents per share related to the issuance of common stock and convertible debentures; and including 1 cent of net realized investment gains in Q3 2010 vs. 21 cents of net realized investment losses and valuation allowance for deferred tax assets in Q3 2009)
"CNO had a strong third quarter, with net income again ahead of expectations, increasing 221 percent to over $49 million compared to last year's third quarter," CEO Jim Prieur says, "as our three core growing businesses continued to perform well. This is the first quarter where we are reporting under our new segmentation, where the performance of our growing Washington National business is separated from our Other CNO Business, which is comprised mainly of closed blocks of business."
Meadowbrook Insurance Group Inc. reported that its Q3 2010 net operating income, a non-GAAP measure, grew by 25.0% or $2.9 million to $14.6 million, or $0.27 per diluted share, compared to $11.7 million, or $0.20 per diluted share, in Q3 2009. The company's income increased 36.5% to $15.0 million, or $0.28 per diluted share, compared to $11.0 million, or $0.19 per diluted share, in the prior year quarter.
Third-quarter gross written premium increased 8.0% to $204.2 million, compared to $189.0 million in the third quarter of 2009. The increase in premium is primarily due to new business initiated in the second half of 2009, Meadowbrook said.
For the three months ended Sept. 30, 2010, Meadowbrook reported a net earned premium increased 25.1% to $171.9 million, compared to $137.4 million in the third quarter of 2009. The GAAP combined ratio for Q3 2010 was 95.9%, which is consistent with Q3 2009.
The calendar year loss and LAE ratio for Q3 decreased 2.9 percentage points to 61.6% from 64.5% for the same period in 2009. The 2010 results include favorable development of 4.2 percentage points compared to 2009 results, which included favorable development of 4.5 percentage points. The accident year loss and LAE ratio for the third quarter of 2010 was 65.9%, compared to 69.0% in the third quarter of 2009. The accident year loss and LAE ratio is a non-GAAP measure that represents our GAAP loss and LAE ratio excluding the impact of any adverse or favorable development on prior year loss reserves. The improvement in the accident year loss and LAE ratio reflects a decline in storm related losses and a single fire loss totaling $5.7 million that occurred in 2009, according to the company.
Mercury General Corp. reported its results for Q3 2010. The company's net income in Q3 2010 was $96.8 million ($1.77 per diluted share) compared to net income of $157.7 million ($2.85 per diluted share) for the same period in 2009. For the nine months of 2010, net income was $175.8 million ($3.21 per diluted share) compared to the net income of $368.8 million ($6.70 per diluted share) for the same period in 2009. Included in net income are net realized investment gains, net of tax, of $56.2 million ($1.03 per diluted share) in Q3f 2010 compared with net realized investment gains, net of tax, of $111.4 million ($2.01 per diluted share) for the same period in 2009, and net realized investment gains, net of tax, of $52.5 million ($0.96 per diluted share) for the nine months of 2010 compared with net realized investment gains, net of tax, of $229.2 million ($4.16 per diluted share) for the same period in 2009.
Mercury General's operating income was $40.7 million ($0.74 per diluted share) for Q3 2010 compared with operating income of $46.3 million ($0.84 per diluted share) for the same period in 2009, the company reported. For the nine months of 2010, operating income was $123.3 million ($2.25 per diluted share) compared with operating income of $139.7 million ($2.54 per diluted share) for the same period in 2009.
Net premiums written were $654.7 million Q3 2010, a 1.2% decrease compared to Q3 2009 net premiums written of $662.8 million, and were approximately $1.9 billion for the nine months of 2010, a 1.7% decrease compared to the same period in 2009. Net realized investment gains, net of tax, of $56.2 million and $52.5 million for the third quarter and for the nine months of 2010, respectively, include gains, net of tax, of $57.0 million and $49.4 million, respectively, from the application of the fair value option. Gains, net of tax, from the sale of securities were $0 and $3.2 million during the third quarter and the nine months of 2010, respectively.
Additionally, the company's combined ratio (GAAP basis) was 98.0% in Q3 2010 and 97.8% for the nine months of 2010 compared with 96.4% and 96.5% for the same periods in 2009. The loss ratio was affected by favorable development of approximately $18 million and $40 million on prior accident years' losses and loss adjustment expenses reserves for the nine months ended Sept. 30, 2010 and 2009, respectively. The favorable development in 2010 is largely the result of re-estimates of accident year 2009 California bodily injury losses which have experienced both lower average severities and fewer late reported claims (claim count development) than were originally estimated at Dec. 31, 2009, the company says.
Sun Life Financial Inc. reported net income of $453 million for Q3 2010, compared with a loss of $140 million in the same period last year. Diluted earnings per share (EPS) were $0.79 compared to a loss per share of $0.25 in the third quarter of 2009.
Net income in the third quarter was driven primarily by improved performance in equity markets, and the favorable impact of management actions and assumption changes which generally occur in the third quarter of each year, the company said. Sun Life increased its mortgage sectoral allowance in anticipation of continued pressure in the U.S. commercial mortgage market, however overall credit experience continued to show improvement over the prior year. The net impact from interest rates on third quarter results was not material as the unfavourable impact of lower interest rates was largely offset by favorable movement in interest rate swaps used for asset-liability management.
Assets under management increased by 10% over the prior year to $455 billion as Sun Life continues to focus on leveraging its enterprisewide strength in asset management, the company reported. The increase was due to improvements in equity markets, growth in Sun Life's wealth businesses primarily due to net sales of mutual and managed funds, and the positive impact of the Lincoln U.K. acquisition, offset by the strengthening of the Canadian dollar.
"Improvements in equity markets and continued strong execution of our strategy resulted in solid earnings across major business lines and geographies compared to the same period last year," says CEO Donald Stewart. "We are pleased with the results in our Canadian and Asian businesses, the progress in the execution of our U.S. strategy and the growth and strong performance of MFS Investment Management. Overall results this quarter also benefited from Sun Life's long-standing focus on risk management."
The Hartford Financial Services Group Inc. reported Q3 2010 net income of $666 million, or $1.34 per diluted share. In Q3 2009, the company reported a net loss of $220 million, or $(0.79) per diluted share. Core earnings for Q3 2010 were $710 million, or $1.43 per diluted share, compared with core earnings of $660 million, or $1.56 per diluted share, for the prior year.
The Hartford reported strong profitability in P&C commercial, with a 92.2% combined ratio, excluding catastrophes and prior year reserve development. The company's P&C commercial net income was $306 million, an increase of 41% compared with $217 million for the prior year period. The increase in net income reflected lower catastrophes and underwriting expenses, higher investment income, and almost a full point improvement in the combined ratio, excluding catastrophes and prior year development.
The Hartford also reported that renewal written pricing remained positive in standard commercial lines, rising 1% for the third consecutive quarter.
The insurer's personal lines business in the Consumer Markets division also improved. Consumer Markets' net income was $70 million for Q3 2010, compared with $15 million for the prior year period. The increase was driven by significantly lower current accident year catastrophe losses, an improvement in ex-catastrophe current accident year underwriting results and an improvement in net realized capital gains and losses, the company said. Consumer Markets' combined ratio was 93.3%, excluding catastrophes and prior year development.
"The Hartford delivered strong financial performance this quarter," said Liam McGee, The Hartford's chairman, president and CEO. "These results were achieved through solid execution, including disciplined underwriting performance, improved investment results and growth in assets under management. The environment in the commercial property and casualty lines remains competitive, and economic growth has been slow. In response, we are focused on execution—leveraging our capabilities to retain profitable business and to win new business where it makes sense for us, and driving greater efficiency. We are making good progress implementing our strategy and are well positioned for when the economy begins to expand."
United Fire & Casualty Co. reported its financial results for Q3 and the first nine months of 2010. The insurer says it focused on disciplined underwriting and strong, long-term agency relationships, which have placed it in a strong position for when market conditions improve.
"Our results have improved immensely from the third quarter of 2009, but were not as good as our first two quarters of 2010," says President and CEO Randy Ramlo. "We are still satisfied with our overall results, and having a combined ratio below 100 percent year to date is an encouraging sign. Our results have deteriorated some due to several large losses. Some of these losses occurred this year and some of these losses resulted from developments on losses from prior years."
For the 9-month period ended Sept. 30, 2010, United Fire reported that premium revenues for its property/casualty insurance segment were generated from approximately 91% commercial lines business and 9% personal lines business. The company's top five states for direct premiums written were: Iowa, Texas, Missouri, Louisiana and Illinois.
The net premiums written declined in both Q3 2010 and the first nine months of 2010, compared to the same periods of the prior year. The lingering effects of the recession are still being felt throughout the economy, United Fire says, and by its current and potential commercial policyholders.
"Results this quarter demonstrate that the overall economy is still experiencing the lingering effects of the recession,” Ramlo says. “Premiums continue to be affected by current economic conditions. The soft pricing environment in the insurance industry also continues to impact our business. We found that the soft market persisted in the third quarter and our premium level fell to its lowest point in five years."
Additionally, United Fire's losses and loss settlement expenses decreased 24.5% in Q3 2010 and 22.9% in the first nine months of 2010, as compared with the same periods in 2009. This is due to an improvement year-to-date in our noncatastrophe claims experience and a reduction in the company's Hurricane Katrina development, it said.
XL Group plc (XL) reported its results for Q3 2010. Its operating income was $175.0 million in the third quarter, or $0.52 per ordinary share, compared to $292.6 million in the same quarter last year.
Although it is considered to be a relatively light quarter for natural catastrophe losses, XL says, there was an above average level of large property and excess casualty loss activity impacting the quarter. The pre-tax impact of natural catastrophe losses, net of reinstatement premiums, in the current quarter was approximately $66.2 million compared to $30.8 million in the prior year quarter.
XL says other large property and excess casualty losses incurred during the current quarter had a pre-tax impact of approximately $35.8 million. Income from affiliates decreased $48.2 million from the prior year quarter, primarily reflecting lower income from investment affiliates. Additionally, the company's investment results from structured products decreased $20.5 million compared to the prior year quarter.
"We have delivered another quarter of solid operating results in a market that continues to be challenging," says CEO Mike McGavick.
Additionally, XL announced that its P&C operations delivered a combined ratio of 94.9%, which includes 6.5 points of favorable prior-year development. The current accident year combined ratio for the P&C operations of 101.4% in the quarter included $66.2 million of natural catastrophe losses, net of reinstatement premiums. The underlying combined ratio, which excludes prior year development and natural catastrophes, was 96.2%—virtually unchanged from the prior year.
"This demonstrates our underwriting discipline in a challenging market," McGavick adds. "However, despite this solid underwriting discipline, we continue to feel the impact that the prolonged soft market has on earnings."
