A $250 million reinsurance claim settlement will have minimal impact on CNA's earnings, a rating agency said.
CNA Financial Corporation said on Friday that it reached a settlement of $250 million with John Hancock Life Insurance Company on Sept. 4 to settle four excess of loss reinsurance treaties issued by CNA Reinsurance Company Limited, a former CNA subsidiary.
The Chicago-based insurer said it expects to record an after-tax loss, net of reinsurance, of approximately $110 million in the third quarter of 2007 in connection with a one-time $250 million payment.
"The settlement with John Hancock eliminates an exposure from CNA's book of runoff business," said Stephen W. Lilienthal, chairman and chief executive officer of CAN, in a statement. "We are pleased to put this matter to rest."
On Friday Standard & Poor's Ratings Services said the settlement would result in a modest reduction in the company's net operating income for 2007. For the first six months of this year the company's income was $625 million.
The rating service went on to say the charge was not viewed as material and would have no impact on the carrier's current ratings.
According to CNA, between April 1, 1997 and December 1, 1999, IGI Underwriting Agencies, Ltd., underwrote a number of reinsurance arrangements on personal accident insurance worldwide.
Under various arrangements, CNA Re both assumed risks in the IGI Program as a reinsurer and also ceded a substantial portion of those risks to other companies, including other CNA insurance subsidiaries and a group of reinsurers participating in a reinsurance pool known as the Associated Accident and Health Reinsurance Underwriters Facility.
A portion of the premiums assumed under the IGI Program relating to United States workers' compensation "carve-out" business was received from John Hancock under the treaties. In 2000, CNA Re instituted arbitration proceedings against John Hancock seeking rescission of the treaties. This settlement concluded the proceedings.
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