Continental Casualty Co.,
Under the terms of the transaction, effective Jan. 1, 2010, the CNA companies will cede approximately $1.6 billion of net asbestos and environmental pollution liabilities to NICO, a subsidiary of
The CNA companies will pay to NICO a reinsurance premium of $2 billion, and also transfer to NICO the right to collect billed third-party reinsurance receivables with a net book value of approximately $200 million. To secure its obligations, NICO will deposit $2.2 billion in a collateral trust for the benefit of the CNA companies. In addition, Berkshire Hathaway has guaranteed the payment obligations of NICO up to the full aggregate reinsurance limit as well as certain of NICO's performance obligations under the trust agreement. NICO will assume responsibility for claims handling and collection from third-party reinsurers related to the CNA companies' asbestos and environmental pollution claims.
The closing, subject to approval, is expected to occur in the third quarter of 2010, at which time CNA expects to recognize an after-tax loss of approximately $375 million.
"We believe this transaction is consistent with our focus on financial stability and delivering improved levels of operating consistency as we effectively eliminate a significant source of uncertainty from these legacy liabilities," says Thomas Motamed, chairman and CEO of CNA Financial Corp. "This transaction will allow us to sharpen our focus even further on the execution of strategies to improve and grow our on-going core businesses."