New CNA Exec: No Second Thoughts
If the newest member of CNA's management team asked, "Why now?" when he found out about imminent charges totaling $2.1 billion that were about to hit the books of the company he was joining, Stephen Lilienthal wasn't willing to admit it during a recent earnings conference call.
"I have no second thoughts about joining up," said Mr. Lilienthal, a former executive vice president of The St. Paul Companies.
Mr. Lilienthal joined CNA as president and chief executive officer of the Chicago-based insurer's property and casualty operation a few weeks ago–at a time when CNA's existing executives were immersed in studies that would result in second-quarter charges.
"As we got closer to the point when an offer was going be extended to me, I was impressed with the fact that [CNA Chairman] Bernie [Hengesbaugh] indicated that there was an adjustment that was going to take place [and] that it would be significant enough that he wanted to let me know that it was taking place," Mr. Lilienthal said.
Asked to compare the problems at CNA to those at his former employer, Mr. Lilienthal said: "The magnitude of the issues at CNA are typical of any large carrier these days. We're all struggling with expenses. We're all struggling with rationalizing infrastructure. We're all competing for talent. Those are similar issues that confront CNA [and] everybody else in the industry."
After six days on the job, Mr. Lilienthal said he was surprised at how far along CNA was with their core underwriting initiatives. "There's a little less work to be done than I thought, though not insignificant," he said, noting that CNAs commercial lines combined ratio, excluding the impact of the charges, was 109 for the second quarter.
"We've all been struggling for some time with deteriorating market conditions," he said, referring to carriers that write commercial lines business generally. "I would say that in terms of the timeline, CNA lags some of the other carriers by six to eight months–maybe a year, at the worst, in some areas."
However, "on the optimistic side," he added, "we've got a persisting market right now that I think will give us more than ample opportunity to fix whatever we've got to fix and leverage up on whatever we've got to leverage up on."
Describing the areas that he thinks CNA needs to build out further, he said the Chicago-based insurer could have a deeper specialty focus and a broader global reach. But "the stuff that keeps me up at night is being able to get our [people] back to workThis kind of thing can be very distracting," he said, referring to the charges, mainly for loss reserve additions, that CNA announced.
Making note of CNAs brand, distribution and talent as positives, he said: "I'm very optimistic. I'm very bullish. I wouldn't have showed up unless I was."
Discussing some additional initial observations about CNA, he said that another item on his agenda is to decentralize marketing and distribution activities. On the other hand, "from a technical support standpoint," he said, "there is a definite need to establish clarity and rigor to the underwriting best practices of the organization." Each business unit now has its own underwriting strategy, he said, noting that there is a similar situation in the claims area.
The "technical support, risk appetite, risk tolerance, and all that stuff that supports our field-based underwriting activities will be centralized" under Mr. Lilienthals plan. "What we do in terms of accessing the market, will be as decentralized and as local as possible," he said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 27, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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