Book value per share increased to $50.25 at December 31, 2013 from $49.67 at December 31, 2012. Book value per share excluding Accumulated other comprehensive income (“AOCI”) increased to $49.38 at December 31, 2013 from $47.94 at December 31, 2012.
A ceiling test impairment charge at HighMount is considered a triggering event that requires a goodwill impairment analysis. This analysis resulted in HighMount recording a goodwill impairment charge of $584 million ($382 million after tax), see the Results of Operations by Business Segment section of this MD&A and Note 8 of the Notes to Consolidated Financial Statements included under Item 8 for additional information.
the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes and other factors.
The following table summarizes the results of operations for CNA for the years ended December 31, 2013, 2012 and 2011 as presented in Note 22 of the Notes to Consolidated Financial Statements included under Item 8.
The combined ratio improved 7.1 points in 2013 as compared to 2012. The loss ratio improved 6.2 points in 2013 as compared to 2012, primarily due to an improved current accident year non-catastrophe loss ratio and decreased catastrophe losses in CNA Commercial and Hardy. The expense ratio improved by 0.9 points, primarily due to a higher net earned premium base in CNA Specialty and Hardy, the impact of lower underwriting expenses in CNA Specialty and decreased expenses including favorable changes in estimates of insurance assessment liabilities in CNA Commercial.
CNA’s long term care business was positively impacted in 2013 by the effect of rate increase actions. The favorable impact of rate increase actions was more than offset by unfavorable morbidity.
(c) As of February 5, 2014, for mid-water floaters includes $421 million attributable to contracted operations offshore Brazil for the years 2014 and 2015.
Total revenues increased $40 million in 2012 as compared with 2011, primarily due to $63 million of revenues earned by Petal and Louisiana Midstream and higher PAL and storage revenues of $14 million resulting from improved market conditions. The increase in revenues was partially offset by a decrease in retained fuel of $34 million primarily due to lower natural gas prices.
Net investment income increased $168 million for 2013 as compared with 2012. The increase was primarily driven by a significant increase in limited partnership investment income, partially offset by a decrease in fixed maturity securities income. Limited partnership results were positively impacted by more favorable equity market returns. The decrease in fixed maturity securities income was due to the effect of reinvesting at lower market interest rates, partially offset by a higher invested asset base.
The Company’s carrying value of investments in limited partnerships is its share of the net asset value of each partnership, as determined by the General Partner. Certain partnerships for which results are not available on a timely basis are reported on a lag, primarily three months or less. These investments are accounted for under the
CNA applies the same impairment model as described above for the majority of non-redeemable preferred stock securities on the basis that these securities possess characteristics similar to debt securities and that the issuers maintain their ability to pay dividends. For all other equity securities, in determining whether the security is other-than-temporarily impaired, the Impairment Committee considers a number of factors including, but not limited to: (i) the length of time and the extent to which the fair value has been less than amortized cost, (ii) the financial condition and near term prospects of the issuer, (iii) the intent and ability of CNA to retain its investment for a
Claim and claim adjustment expense reserves - Claim and claim adjustment expense reserves, except reserves for structured settlements not associated with asbestos and environmental pollution (“A&EP”), workers’ compensation lifetime claims, and accident and health claims are not discounted and are based on (i) case basis estimates for losses reported on direct business, adjusted in the aggregate for ultimate loss expectations; (ii) estimates of incurred but not reported losses; (iii) estimates of losses on assumed reinsurance; (iv) estimates of future expenses to be incurred in the settlement of claims; (v) estimates of salvage and subrogation recoveries and (vi) estimates of amounts due from insureds related to losses under high deductible policies. Management considers current conditions and trends as well as past CNA and industry experience in establishing these estimates. The effects of inflation, which can be significant, are implicitly considered in the reserving process and are part of the recorded reserve balance. Ceded claim and claim adjustment expense reserves are reported as a component of Receivables on the Consolidated Balance Sheets.
Property, plant and equipment - Property, plant and equipment is carried at cost less accumulated depreciation, depletion and amortization (“DD&A”). Depreciation is computed principally by the straight-line method over the estimated useful lives of the various classes of properties. Leaseholds and leasehold improvements are depreciated
The Company’s derivative financial instruments with cash flow hedge designation hedge variable price risk associated with the purchase and sale of natural gas and other energy-related products, exposure to foreign currency losses on future foreign currency expenditures, as well as risks attributable to changes in interest rates on long term debt. Losses of $19 million and gains of $43 million and $33 million were recognized in OCI related to these cash flow hedges for the years ended December 31, 2013, 2012 and 2011. Gains of $19 million and $54 million and losses of $28 million were reclassified from AOCI into income for the years ended December 31, 2013, 2012 and 2011. As of December 31, 2013, the estimated amount of net unrealized losses associated with these cash flow hedges that will be reclassified from AOCI into earnings during the next twelve months was $6 million. For each of the years ended December 31, 2013, 2012 and 2011, the net amounts recognized due to ineffectiveness were less than $1 million.
Leases cover office facilities, machinery and computer equipment. The Company’s hotels in some instances are constructed on leased land. Rent expense amounted to $92 million, $96 million and $91 million for the years ended December 31, 2013, 2012 and 2011. The table below presents the future minimum lease payments to be made under non-cancelable operating leases along with lease and sublease minimum receipts to be received on owned and leased properties.
Provision has been made for the expected U.S. federal income tax liabilities applicable to undistributed earnings of subsidiaries, except for certain subsidiaries for which the Company intends to invest the undistributed earnings indefinitely to finance foreign activities, or recover such undistributed earnings tax-free. The determination of the amount of the unrecognized deferred tax liability on approximately $2.4 billion of undistributed earnings related to foreign subsidiaries is not practicable.
The American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013. The act extends, through 2013, several expired or expiring temporary business provisions, commonly referred to as “extenders”, which are retroactively extended to the beginning of 2012. As required by GAAP, the effects of new legislation are recognized when signed into law. The Company reduced 2013 tax expense by $28 million as a result of recognizing the 2012 effect of the extenders.
CNA attempts to mitigate its credit risk related to reinsurance by entering into reinsurance arrangements with reinsurers that have credit ratings above certain levels and by obtaining collateral. On a limited basis, CNA may enter into reinsurance agreements with reinsurers that are not rated, primarily captive reinsurers. The primary methods of obtaining collateral are through reinsurance trusts, letters of credit and funds withheld balances. Such collateral was approximately $3.9 billion and $3.7 billion at December 31, 2013 and 2012.