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Insurance industry

CNA Financial Corp. Embarks on Restructuring to Boost Competitiveness

Strategic Insights

— 1 min read

CNA Financial Corp., led by Chairman and CEO Dennis Chookaszian, has initiated a comprehensive review of its business units over the next year-and-a-half to enhance competitiveness. The Chicago-based insurer will lay off 1,100 workers, approximately 20% of its workforce, in its commercial insurance unit, and consolidate policy transactions and claims handling to reduce costs. This strategic move is designed to boost the company's return on equity, which has been hovering around 12% to 14%, and improve its position as a top player in each of its businesses.

Key Takeaways:

  • CNA Financial Corp. will re-examine each of its business units over the next year-and-a-half to enhance competitiveness.
  • The company plans to lay off 1,100 workers, approximately 20% of its workforce, in its commercial insurance unit.
  • CNA will consolidate all commercial insurance policy transactions into its Orlando, Fla., office and claims handling into eight units, down from 24.
  • The company aims to achieve a 15% return on equity, which is currently hovering at 12% to 14%.
  • CNA has exited several businesses over the past three years, including the agricultural insurance business.
  • Analysts view CNA's move as a response to both general market conditions and its own circumstances.
  • The company's expense ratio is high relative to its industry peers, but CNA aims to become the lowest-cost producer in each of its businesses.

Statistics:

  • CNA Financial Corp. reported $966 million in net income in 1997, which was almost flat compared with 1996's $965 million.
  • The company plans to lay off 1,100 workers, approximately 20% of its workforce.
  • CNA's commercial insurance unit focuses on businesses generating $1 million or less in annual premiums.
  • The company aims to achieve a 15% return on equity, which is currently hovering at 12% to 14%.
  • CNA has 24 claims handling units, which will be consolidated into eight units.

Sources:

  • CRAIN'S sister publication Business Insurance
  • Standard & Poor's Corp. (S&P)
  • Conning & Co.
  • Merrill Lynch & Co.
  • CNA Financial Corp.'s 1997 annual report

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