Ҵý

Ҵý Financial Announces Third Quarter 2015 Results

CHICAGO, Nov. 2, 2015 /PRNewswire/ --Ҵý Financial Corporation (NYSE: Ҵý) today announced third quarter 2015 net operating income of $210 million, or $0.77 per share, and net income of $178 million, or $0.66 per share. Property & Casualty Operations' combined ratio for the third quarter was 85.7%.

Ҵý Financial also declared a quarterly dividend of $0.25 per share, payable December2, 2015 to stockholders of record on November 16, 2015.


Results for the Three Months Ended September 30


Results for the Nine Months Ended September 30

($ millions, except per share data)

2015


2014


2015


2014

Net operating income (a)

$

210



$

182



$

567



$

644


Net realized investment gains (losses)

(32)



27



(18)



46


Income (loss) from discontinued operations, net of tax



4





(197)


Net income

$

178



$

213



$

549



$

493










Net operating income per diluted share

$

0.77



$

0.68



$

2.09



$

2.38


Net income per diluted share

0.66



0.79



2.03



1.82



























September 30, 2015



December 31, 2014


Book value per share

$

45.38



$

47.39


Book value per share excluding AOCI

45.16



45.91



() Management utilizes the net operating income financial measure to monitor the Ҵý's operations. Please refer to Note P in the Consolidated Financial Statements within Ҵý's Annual Report on Form 10-K for the year ended December 31, 2014 for further discussion of this measure.

Property & Casualty Operations' net operating income was $263 million for the third quarter of 2015 as compared with $241 million in the prior year quarter. Improved underwriting results were partially offset by lower limited partnership investment results. Catastrophe losses were $10 million after tax for the third quarter of 2015 and prior year quarter, primarily due to U.S. weather-related events.

Net operating results for our non-core segments improved $6 million from the prior year quarter. The prior year quarter included a $34 million after-tax loss on a coinsurance transaction related to the sale of Continental Assurance Ҵý and a $9 million reduction in the allowance for uncollectible reinsurance receivables. Excluding these items, the decline in results for our non-core segments in the current year quarter was driven by our long term care business.

After-tax net investment income decreased to $265 million for the third quarter of 2015 as compared with $346 million in the prior year quarter. This decrease was driven by limited partnership investments, which returned (3.2)% as compared with 1.0% in the prior year quarter.

Property & Casualty Operations

"Each of our segments achieved a solid underwriting result in the quarter highlighted by a P&C combined ratio of 85.7%," said Thomas F. Motamed, Chairman and Chief Executive Officer of Ҵý Financial Corporation. "Most importantly, our loss ratio excluding catastrophes and development continues to step in the right direction particularly in the Commercial segment where we achieved a 3-point improvement from the same prior year period."


Results for the Three Months Ended September 30



Results for the Nine Months Ended September 30


($ millions)

2015


2014


2015


2014

Net written premiums

$

1,529




$

1,560




$

4,836




$

4,981



NWP change (% year over year)

(2)


%


(4)


%


(3)


%


(3)


%

Net operating income

$

263




$

241




$

764




$

696



Net income

228




247




738




708















Loss ratio excluding catastrophes and development

61.9


%


62.9


%


62.0


%


63.2


%

Effect of catastrophe impacts

0.9




1.0




2.1




3.0



Effect of development-related items

(10.7)




(1.1)




(3.7)




0.1



Loss ratio

52.1


%


62.8


%


60.4


%


66.3


%













Combined ratio

85.7


%


96.1


%


94.3


%


99.7


%

Combined ratio excluding catastrophes and development

95.5


%


96.2


%


95.9


%


96.6


%

Business Operating Highlights

Specialty



Results for the Three Months Ended September 30



Results for the Nine Months Ended September 30


($ millions)

2015


2014


2015


2014

Net written premiums

$

707




$

736




$

2,077




$

2,150



NWP change (% year over year)

(4)


%



%


(3)


%


(1)


%

Net operating income

$

179




$

184




$

451




$

480



Net income

165




186




440




486















Loss ratio excluding catastrophes and development

61.6


%


61.2


%


61.9


%


62.2


%

Effect of catastrophe impacts

0.5




0.7




0.7




1.0



Effect of development-related items

(18.6)




(11.2)




(7.1)




(6.1)



Loss ratio

43.5


%


50.7


%


55.5


%


57.1


%













Combined ratio

74.4


%


80.8


%


86.6


%


87.4


%

Combined ratio excluding catastrophes and development

92.5


%


91.3


%


93.0


%


92.5


%


  • Net operating income decreased $5 million for the third quarter of 2015 as compared with the prior year quarter. Improved underwriting results were more than offset by lower net investment income.
  • The combined ratio improved 6.4 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 7.2 points driven by higher favorable net prior year development. Catastrophe losses were $3 million, or 0.5 points of the loss ratio, for the third quarter of 2015 as compared with $5 million, or 0.7 points of the loss ratio for the prior year quarter. The expense ratio increased 1.0 point for the third quarter of 2015 as compared with the prior year quarter, due to the unfavorable effect of lower net earned premiums.
  • Net written premiums for the third quarter of 2015 decreased $29 million as compared with the prior year quarter, driven by lower new business. Average rate was flat for the policies that renewed in the third quarter of 2015 while achieving a retention of 86%.

Commercial



Results for the Three Months Ended September 30



Results for the Nine Months Ended September 30


($ millions)

2015


2014


2015


2014

Net written premiums

$

642




$

634




$

2,118




$

2,133



NWP change (% year over year)

1


%


(8)


%


(1)


%


(5)


%

Net operating income

$

75




$

52




$

273




$

175



Net income

54




57




257




181















Loss ratio excluding catastrophes and development

60.4


%


63.3


%


62.3


%


65.1


%

Effect of catastrophe impacts

1.4




2.0




4.0




5.6



Effect of development-related items

(1.2)




10.6




0.2




8.2



Loss ratio

60.6


%


75.9


%


66.5


%


78.9


%













Combined ratio

95.8


%


110.7


%


102.1


%


113.4


%

Combined ratio excluding catastrophes and development

95.6


%


98.1


%


97.9


%


99.6


%


  • Net operating income increased $23 million for the third quarter of 2015 as compared with the prior year quarter, due to improved underwriting results partially offset by lower net investment income.
  • The combined ratio improved 14.9 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 15.3 points, due to favorable net prior year development in the current year quarter as compared to unfavorable net prior year development for the prior year quarter and an improved current accident year loss ratio. Catastrophe losses were $10 million, or 1.4 points of the loss ratio, for the third quarter of 2015, as compared with $14 million, or 2.0 points of the loss ratio, for the prior year quarter. The expense ratio increased 0.6 points for the third quarter of 2015 as compared with the prior year quarter, due to the unfavorable effect of lower net earned premiums.
  • Net written premiums increased $8 million for the third quarter of 2015 as compared with the prior year quarter. Higher new business and retention as well as positive rate were substantially offset by the residual effect of previous underwriting actions undertaken in certain business classes. Average rate increased 2% for the policies that renewed in the third quarter of 2015 while achieving a retention of 76%.

International



Results for the Three Months Ended September 30



Results for the Nine Months Ended September 30


($ millions)

2015


2014


2015


2014

Net written premiums

$

180




$

190




$

641




$

698



NWP change (% year over year)

(5)


%


(3)


%


(8)


%



%

Net operating income

$

9




$

5




$

40




$

41



Net income

9




4




41




41















Loss ratio excluding catastrophes and development

68.0


%


67.0


%


61.1


%


60.3


%

Effect of catastrophe impacts

0.3




(1.0)




0.8




0.7



Effect of development-related items

(15.9)




(6.3)




(6.0)




(6.2)



Loss ratio

52.4


%


59.7


%


55.9


%


54.8


%













Combined ratio

90.4


%


99.0


%


93.5


%


94.1


%

Combined ratio excluding catastrophes and development

106.0


%


106.3


%


98.7


%


99.6


%


  • Net operating income increased $4 million for the third quarter of 2015 as compared with the prior year quarter, due to improved underwriting results driven by higher favorable net prior year development.
  • The combined ratio improved 8.6 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 7.3 points. This improvement was due to higher favorable net prior year development, partially offset by a higher current accident year loss ratio. The deterioration in the current accident year loss ratio was driven by large losses, including losses related to the explosion in Tianjin, China. The expense ratio improved 1.3 points due to lower expenses, partially offset by the unfavorable effect of lower net earned premiums.
  • Net written premiums decreased $10 million for the third quarter of 2015 as compared with the prior year quarter. The decrease was driven by the unfavorable effect of foreign currency exchange rates. Excluding the effect of foreign currency exchange rates, net written premiums increased 5% for the third quarter of 2015 as compared with the prior year quarter driven by higher new business. Average rate decreased 1% for the policies that renewed in the third quarter of 2015 while achieving a retention of 73%.

Life & Group Non-Core



Results for the Three Months Ended September 30


Results for the Nine Months Ended September 30

($ millions)

2015


2014


2015


2014

Total operating revenues

$

318



$

313



$

960



$

948


Net operating loss

(30)



(42)



(71)



(35)


Net loss

(28)



(21)



(65)



(7)



  • Net operating loss decreased $12 million for the third quarter of 2015 as compared with the prior year quarter. The prior year quarter included a $34 million after-tax loss on the coinsurance transaction. The net operating loss for our long term care business increased $23 million. Long term care results in 2014 benefited from unusually favorable morbidity experience as compared to unfavorable morbidity experience in the current year quarter.

Corporate & Other Non-Core



Results for the Three Months Ended September 30


Results for the Nine Months Ended September 30

($ millions)

2015


2014


2015


2014

Interest expense

$

39



$

48



$

117



$

138


Net operating loss

(23)



(17)



(126)



(17)


Net loss

(22)



(17)



(124)



(11)


  • Net operating loss increased $6 million for the third quarter of 2015 as compared with the prior year quarter. The current year quarter included lower interest expense due to maturity of higher coupon debt in the fourth quarter of 2014. Results in the prior year quarter were favorably affected by a $9 million after-tax reduction in the allowance for uncollectible reinsurance receivables arising from a change in estimate.

About the Ҵý

Serving businesses and professionals since 1897, Ҵý is the country's eighth largest commercial insurance writer and the 14th largest property andcasualtycompany. Ҵý's insurance products include standard commercial lines, specialty lines, surety, marine and other property and casualty coverages. Ҵý's services include risk management, information services, underwriting, risk control and claims administration.For more information, please visit Ҵý at ."Ҵý" is a service mark registered by Ҵý Financial Corporation with the United States Patent and Trademark Office. Certain Ҵý Financial Corporation subsidiaries use the "Ҵý" service mark in connection with insurance underwriting and claims activities.

Conference Call and Webcast/Presentation Information

A conference call for investors and the professional investment community will be held at 10:00 a.m. (ET) today. On the conference call will be Thomas F. Motamed, Chairman and Chief Executive Officer of Ҵý Financial Corporation, and other members of senior management. Participants can access the call by dialing (888) 299-7209, or for international callers, (719) 325-2494. The call will also be broadcast live on the internet at or you may go to the investor relations pages of the Ҵý website () for further details. A presentation will be posted and available on the Ҵý website and will provide additional insight into the results.

The call is available to the media, but questions will be restricted to investors and the professional investment community. An online replay will be available on Ҵý's website following the call. Financial supplement information related to the results is available on the investor relations pages of the Ҵý website or by contacting Robert Tardella at 312-822-4387.

Definition of Reported Segments

Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters.

Commercial works with an independent agency distribution system and a network of brokers to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses and organizations.

International provides property and casualty insurance and specialty coverages in Canada, the United Kingdom and Continental Europe as well as globally through its operations at Lloyd's of London.

Life & Group Non-Core primarily includes the results of the individual and group long term care businesses that are in run off.

Corporate & Other Non-Core primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including Ҵý Re and asbestos and environmental pollution.

Financial Measures

In the evaluation of the results of Specialty, Commercial and International, management utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios.

This press release may also reference or contain financial measures that are not in accordance with GAAP. For reconciliations of non-GAAP measures to the most comparable GAAP measures, please refer herein and/or to Ҵý's most recent 10-K on file with the Securities and Exchange Commission available at .

Forward-Looking Statement

This press release may include statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as "believes", "expects", "intends", "anticipates", "estimates" and similar expressions. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected. Many of these risks and uncertainties cannot be controlled by Ҵý. For a detailed description of these risks and uncertainties affecting Ҵý, please refer to Ҵý's most recent 10-K on file with the Securities and Exchange Commission available at .

Any forward-looking statements made in this press release are made by Ҵý as of the date of this press release. Further, Ҵý does not have any obligation to update or revise any forward-looking statement contained in this press release, even if Ҵý's expectations or any related events, conditions or circumstances change.

CONTACT:

MEDIA:


ANALYSTS:

Brandon Davis, 312-822-5167


James Anderson, 312-822-7757

Sarah Pang, 312-822-6394


Derek G. Smith, 312-822-6612



Robert Tardella, 312-822-4387

SOURCE Ҵý Financial Corporation