NU Online News Service, Sept. 1, 3:15 p.m. EDT
CNA Financial Corp. said it has completed transferring its legacy asbestos and environmental pollution liabilities to Berkshire Hathaway's National Indemnity Company (NICO).
CNA said it expects to record an after-tax loss of about $370 million in its third-quarter financial statement.
Under the terms of the agreement, CNA's Continental Casualty Company and several other insurance subsidiaries gave NICO about $1.6 billion of asbestos and environmental (A&E) pollution liabilities under a retroactive reinsurance agreement with a total limit of $4 billion effective Jan. 1, 2010.
The move is meant to get CNA out from under legacy issues from claims in the 1970s and '80s. Exclusions now in policies will keep CNA safe from the risk in the future, but the company would consider, "on a case-by-case" basis, if a client needed the coverage, CNA has said.
A.M. Best Co. said the move is positive because it "dramatically reduces the uncertainty of its legacy liabilities and virtually eliminates any A&E earnings drag for the foreseeable future."
CNA's financial strength rating of "A (Excellent)" remains unchanged, A.M. Best said.
As part of the transfer transaction, CNA will pay NICO a reinsurance premium of $2 billion and transfer the right to collect third-party reinsurance receivables to NICO, with a net value of $200 million. NICO assumes claims handling and collection from third-party reinsurers related to the A&E claims being transferred from CNA.
Continental Casualty Co. recorded about $126.1 million in net income in 2009, a drop of 72.6 percent from nearly $459.5 million in income the prior year, according to Highline Data, part of the National Underwriter Company. Net income for the Continental Casualty Group was $16.6 million in 2009 after the group took about a $172.1 million net loss in 2008.
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