Updated from 7:50 a.m. EST
posted a gaping third-quarter loss because of reserves to cover exposures to construction, asbestos and other claims and said its parent,
( LTR), will make a cash infusion to keep the company's capital in line with statutory levels.
Disclosure of the loss, which totaled $1.76 billion in the quarter, explains a joint decision Nov. 4 by the three major stars in the Robert and Laurence Tisch constellation to move back the release date of all three companies' earnings. Aside from Loews and CNA, the brothers control the
tracking stock of Loews' tobacco operations.
CNA lost $1.76 billion, or $7.94 per share, as compared with net income of $54 million, or 24 cents a share, for the same period in 2002. The latest quarter included a charge of $978 million after-tax related to core reserves and $517 million after-tax related to asbestos, environmental pollution and mass tort reserves.
For its part, Loews lost $1.38 billion, or $7.60 a share, in the third quarter thanks to the goings-on at CNA. None of the figures were remotely comparable to Thomson First Call estimates due to the charge.
CNA, which previously said it was reviewing its reserve situation, said the charges reflected construction defect and other exposures, and a "ground up" analysis of the asbestos, environmental pollution and mass tort reserves. They also followed additional changes to the company's reinsurance contracts, including a reinsurance pact.
To keep the CNA ship from foundering, Loews will buy a $750 million convertible note with a conversion price that makes it "economically equivalent" to existing common. The money will be used to raise the statutory surplus of CNA's principal insurance subsidiary, Continental Casualty Co. Loews also agreed to provide $650 million of additional capital support through the purchase of surplus notes in the event certain milestones aren't achieved.
"Essentially, we have re-underwritten, re-platformed, restaffed and repositioned the business portfolio, and will be recapitalizing CNA," the chairman, Stephen W. Lilienthal, said in a statement. "I am certainly disappointed with the actions necessary to strengthen our balance sheet, but I remain very positive about the current performance of our core businesses, particularly property and casualty and group operations."
On an operating basis, CNA's net written premiums fell $199 million in the third quarter from a year ago, reflecting the ceding of premiums under reinsurance treaties forced by the big third-quarter charge. On the bright side, CNA's standard lines saw average rate increases of 16% in the third quarter.
CAN closed Tuesday at $21.06.