CNA - Earnings call transcript Q1 2019 | CNA Financial Corporation

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Operator

Ladies and gentlemen, good morning and welcome to CNA's Discussion of its 2019 First Quarter Financial Results. CNA's first quarter earnings release, presentation and financial supplement were released this morning and are available via its website, www.cna.com.

Speaking today will be Dino Robusto, CNA's Chairman and Chief Executive Officer; and James Anderson, CNA's Chief Financial Officer.

Following their prepared remarks, we will open the lines for question. Today's call may include forwarding-looking statements and references to non-GAAP financial measures. risks materially that during from involve results cause the statements differ to the forward-looking and may uncertainties actual call. Any statements made release XX-K those CNA's SEC. concerning risks contained the Information is most file on earnings recent with the in and

statements forward-looking the as only this statements XXXX. made forward-looking April to update of any expressively during disclaims In obligation Monday, or XX, speak addition, today CNA revise any call.

in information the to the supplement. most GAAP have non-GAAP been being the other provided is measures, reconciliations call Regarding webcast. financial measures This comparable and and recorded

next During go Chairman Please on turn and that, the the the website. will Robusto. Dino ahead, week, accessed Sir. call may I CNA's CEO, CNA's be call to over With

Dino Robusto

the first the per result year with XXX comparable last Thank for reflected $X.XX This which points combined first million performance equity are performance Core strong X.X%. quarter strong quarter today income the return ratio prior you, quarter. prior investment was or losses. Good including share quarter results and share, XX.X%, from outlier everyone. Abbie. you to of X.X with morning XX.X% were I’m on a we generating XX% pleased Core was up of the result. up our to catastrophe over

significantly elevated the levels levels the loss improvement were the in losses The combined P&C of loss and decade For on the underlying expected of quarter one quarter, which in was a down underwriting XX.X%, lowest XX.X%. XXXX the underlying was as from last ratio at ratio result international reflects continued was fourth XX.X% improved. year's full-year in ratio quarter property level XX.X%

the XX.X%, the quarter slightly due run than premium. Our earnings rate of higher expense ratio seasonality our was in to

quarter, X% was our premium good achieve our previously. the This and third-party London-based operations down have captives up net decrease of was down XX%, lower written excluding efforts continue segments from net written which anticipated We by that premium driven in we X%. was growth premium in In discussed was International's resulting premium gross net U.S. written with the to XX%. re-underwriting

We the overall continue increases dynamic, In rate XX%. specialty to would and in first for U.S. effectively X manage rate up strong up up improve achieving segment, quarter, to rate the X%. the points In X% P&C doing retention retention was was retentions rate and our was so the

Importantly, it where we is most. more achieved rate needed incrementally

strength a this rate For up plus in higher an quarters or reflecting was exceeds was our tailwind. from optimistic re-underwriting were last than news and can fourth quarters efforts. renewal trajectory point and in I basis, over property these recent plus for increasingly sustained compensation what migrating result was all auto to be X% up headwind in are ability healthcare of an excluding on the change rate we long-run outcome April. lines already the quarter. company that major continue we was more based up from Commercial premium in X% a which our and several that up umbrella retention X example, long-run good seen rate X% XX% additional needs quarter. retention both in the outcome up of drive commercial achieved consistent up points both to our to On with but in earned and loss cost included X%, to by workers pricing we X% public the X margin lines course our in I’m first rate the XX.X about have strength. has while more X loss it Commercial in that to be the rate the our order D&O quarter, in quarter of than is from X%, point, X us encouraged to rate International QX. up cost fourth improvement, being first at push encouraged up was Overall, XX%. point was continue again

in the quarter, was in U.S it highest of years. down in any one While new quarter was of business X% recent the the still levels

result, new pleased a I As to underlying tenants be access one continue of key getting to the with our strategy, high-quality of business.

and operation. to example re-underwriting We underwriting expert is of A decisive recent an our institutionalize D&A. enduring more also our this at London culture effort here continue action

underlying segment XXX.X%. first a international ratio combined compared underlying full ratio an significant generated quarter, combined XXXX XX.X% the Our in the year of improvement with

international in difference, actions risk a year, the mind, political exited underwriting like in will have of lines keep will our be XXXX beyond to starting the process contracts. some long-term this make are because exposures While and executed throughout of

long-term James. will continues care our business on solid turn I over perform to Finally, to expected. it is footing now as

James Anderson

and Thank Dino, you, good morning everyone.

Pretax Our casualty XX underwriting profit million. of property was the quarter. produced profit XXX underwriting underlying million income and in operations and first XX million core of

regarding quarter. make Let the with release earnings presentation and that would the quarter point press Traditionally, comparison. In comparison prior a the provide me just first we performance to XXXX with commentary quarter. with compared regard year here to provides XXXX you first

loss spend XXXX repaired the these results ratio underlying the with expense Giving umbrella as to performance. of first lines quarter new well acquisition two year However, regard trend. of quarter first our our XXXX's we a both underwriting year ratio we was quarter reevaluated year's in full the an more was as more the underwriting the full of from and with causing quarter be outsourcing upward to the terms our loss favorable cost loss comparing were to higher ratio. first indicative XXXX we thought benefited quarter offset. one-time Last current expense ratios items, first indicative the current for results technology ratio outlier level low ratio, as last the of year, after had and first and loss than property underlying With

of When run full ratio higher $X.XX on numerator ratio, mentioned, a denominator at XXXX's above is lower to our but at is expense is underwriting XXXX, dollars the premium the is acquisition our in the net XX.X%. of we first XX.X% that and in some year ratio of slightly The it the than components Dino As expense earned par and expense our the the with underwriting quarterly current quarters third is level, it than of seasonality average, but has ratio is fourth. ratio and than look our normalized rate. second annual of

addition seasonality In the reinsurance increased spend of muting growth expense therefore year and ratio. is level affecting the this premium our net and to

favorable combined of was loss including quarter ratio individual of each to quarter ratio third-party in Specialty's of XX.X% of primarily catastrophe prior by XX.X% was captives an XX.X%. underlying the development including years favorable losses X% our prior Moving period P&C gross driven and written in in grew both frequency point premium for overall Specialty's XXXX ratio institution. X accident combined the financial Specialty's underlying the ex surety points X.X and segments. quarter. for

the On a underlying first fourth ratio the XXXX reorganized with and year the normalized Our improved a was half basis, better quarter loss materially results XX.X. manage expenses. loss commercial ratio within the line loss our quarter. in in commercial about quarter full XX% related as was from to severance actions adjustment department ratio was slightly underlying underlying The XX.X the taken point we expense to claim in segment's combined of including about

from The first was in the points for X% approximately latter $XX half unfavorable X combined of catastrophe captive premium combined of million further overall of in implemented. the reserve catastrophe affirming the period entirely the quarter grew ratio to lines we're existing first ratio gross re-underwriting underlying all development our ratio development, combined the development. ex written catastrophe a X quarter. The and more losses little XXX.X our point including the event. segment commercial point which including was equates about of in was we favorable quarter all-in quarter. and prior strategy for international as related XXX.X% losses X.X Nearly points XX.X have Commercial's The XXXX of third-party that than to a came

our $XX produced care in core our of quarter. positive consistent continued Long-term million of results. assumptions, income experience with driver to group license reserve the persistency Our be with our segment morbidity the

core Pretax in benefiting in and the XXX quarter. first produced portfolios, which prior the was The our limited asbestos return. of year deferred first the from X.X% of or the million quarter by Our with common and quarter net change corporate million XX investment gain. income a income of million in driven X segment produced was environmental compared equity amortization partnership loss million XXX pretax

year it into portfolios last to income quarter from than down with on effective assets was quarter. duration liability group targets. The license to P&C X.X of years than support still million a higher we're fixed hedge X.X to again from Fixed portfolio. alone, this the support pretax end. effective fixed million income slightly had year. was quarter this path our quarter, XXX portfolio income fixed quarter income result income redeemed in exposure While at income in and yield slightly prior to liabilities reduce is the duration higher was at funds hedge assets effective period. quarter the redeployed welcome our prior $XXX our X.X% In fixed our end portfolio years the first line following of fund The we Pretax our the moving the

$XX.XX or XXXX equity $X.XX when strong. At $XX.XX shareholders comprehensive position dividend large paid paid XX.X during equity in share, quarter quarter. than billion up XXXX the or share continues an from the an from offset share, adjusted XX.X sheet the X% quarter. extremely accumulated other Our more as of income increase to for per year-end our balance excluding per increase was billion Shareholders was per to year-end end, unrealized gain in be

and was was end. net first million. operating the portfolio's flow $XXX In billion investment X.X Our gain cash at quarter, unrealized quarter

We continue structure. a capital to conservative maintain very

share. our Dino. metrics All And above dividend of to announce our of turn per adequacy quarterly we're will pleased I rating. and and credit are it well $X.XX regular capital With to that, back targets our current internal

Dino Robusto

Thanks James.

question-and-answer we call, thoughts priority being quartile top underwriter. the it been Before the a foundation with some last ratio underwriting years. leave loss of portion our overarching top are our in over underlying of of excellences ratio has where let the particularly me of The and pursuit you is loss we to the two move on

faced our the of Moreover, reflects the quality squarely are our quarter that mitigate by top can to This seeing is we underlying starting achieve was XX.X% the us and and trends, conditions headwind rate ratio today and we which the in cost I market. long-run remain years execution. loss in performance cortile is in has encouraged trajectory the pricing terms of recent offsetting the loss overall

is there our by managing us gross with the achieved underwriting the our in we and numerator over improve balancing And Of over X written in period. expenses ratio sustained we our more beyond year while we last to past had that grew improvement finding operational time to grow both course, the talent while improvement premium U.S have continued expense top and continue technologies our that as outperformance down roughly quarter X% further two the quartile requires year book this point were first Indeed, investment years. efficiency.

Although, our and quartile ratio premium ability basis. spend a earned the in is to top muting is expense new Bottom ability your demonstrated improvement profitably a potential line that, expanding lowering will underlying to and expense our the additional very while with currently ratio, in improving support loss take a glad time to volatility. growth our sustained With incremental the we make to grow we're segment at temporary be growth. willing reinsurance on feel this we questions. to performance achieve together to confident This strong reduce trade ratio by

Operator

will our with [Operator We you. first Lynch. Cohen America of take from Thank Bank instructions] Jay Merrill question

Jay Cohen

the -- just do point? pretty as forward, to guess Thank segment, a on number I It that is Yes. I reasonable at view was the everything normalized XQ wanted you. fairly ask, corporate straightforward. basis this going was you

James Anderson

better probably -- rate, would normal significantly. say little Jay not than bit run I that's -- question. We the Thanks a this but the for James. is

Operator

Josh from question we Deutsche with take will And next Bank. Shanker our

property speak in about haven't or seen some reinsurance? maybe in If higher industry can you you renewals speak at yet, of look back how can maybe particular, from have of the there? CNA. cost CNA price much particularly be we that we that the given that midyear improvements potentially If a I thoughts realize but you're in but would lines, out having,

James Anderson

basis. that you would a Josh, will property renewed don't we're think I expect we rate our Well, pressure on primary getting there. have the there's not know, yet, that to going overwhelm But of we be think reinsurance amount I it

the on it has overall, maybe a margin, but it So won't. muting effect,

Josh Shanker

of we of there? we're commercial Where can three and price in happened auto, terms line what's of are on like where it a again, sort getting And I be we increases, that industry? be CNA years can or of in are material the feel triaging in terms

James Anderson

I think right Josh, cost we spot getting were we're loss now, combined that but where ratio well trend, starting high. where ahead was we're too of from our a

way have getting appropriate So that we are it, comfortable the on but to making a we're before return we progress business. still go on

Josh Shanker

think Do year auto will it's a by going or you our be while? strong rate stabilize end, to commercial increases for

James Anderson

Josh. today. I we're down to I the thinking mean, I get suspect it think the than that only combined that ratio continue, we don't it's going to where is further ones need

pushing certainly where moment. the we're that's So at

Josh Shanker

Okay. Well, Yes? thank you.

Dino Robusto

and quarter, X% that's in read in on the X% quarter It's in continues. good early a increasing the And sign. progressively momentum first was right, April so, Josh, fourth the it it's is,

Operator

our We'll Ransom Dowling with from question & next Gary Partners. take

Gary Ransom

a good on that also, still I had rate your about loss just rates you relatively trend it's loss being the are of trying think Yes, with been? the remain side, question morning. this through point At the consistent on trend. where seeing comments ahead to

James Anderson

loss think trends overall, very stable. Yes, Gary, are cost I

focus not trend. run cost and we're any seeing we So change there the on long loss

trends the loss So remain we term, long cost in shorter run variation do see but stable.

Gary Ransom

workers' we when accelerating of declining? flat. think where the you rates, still that number Is the yet overall rates is several examples So of just the relatively because about gave comp

Dino Robusto

a Dino. that's I good -- Yes, question. it's mean it's hi, Gary,

it to You when at you you what's -- -- underneath. it that to level, really at look masks got happening have

look have the You at a various and take to really portfolio our segments.

And also at, for size, -- They pricing they've Specialty, market going on as in priced, parameters in its accounts. for This particularly take, very there actuarially is business look experience are have lockstep movements know, within program this these with They you decade. the of book lines other an mask that's individual profitable probably can as very us you E&O been in it them. a Specialty, in multiyear very, don't let's been If quarter-to-quarter case, Specialty undulate of as professional based. up. because a example, programs of large

sort to that have put aside. you So of

If in the you'd programs plus put the fourth our in specialty, quarter. quarter, in pricing is up from affinity X% first aside X% up

of you public then the of and other D&O. some going -- So up are it lines and we gave examples the healthcare

decreases Commercial, a really is a on of Gary, in function like So very been side, which peaking then and of NCCI at you improve. when has you work portfolio filing, large the work negative. the the the it's news good comp and it the our specialty a it the particular, it's start take I program look are midyear lot comp is both say on should rate on to at mean,

a on of it's the of up couple a take little to rounding, -- need comp a of and a about point. talks if bit you that So Commercial look the at and ex-work tenths

undulate doesn't do filings up there is the individual and that based small business the comes different. by it quarter. that -- are accounts. also, like on any we in more state really Those too It one Within mix

need you feeling about take trends there it's a some if really layers the So why a down and and few good we're really do to execution. good look pretty there's in

Gary Ransom

been first the a a affecting least, retention unusual up there that in normal in your Was was been Specialty, quarter also that? trend? quite Within than bit it's Or a moved at something higher or it's while.

Dino Robusto

first of back levels of 'XX, it's the quarter, not, a historically had from the lost the quarter there so against year program large -- normal the -- levels its is in its that retention that we this and got threat, at first you're high it Yes, in quarter now. had that

Gary Ransom

Okay. on Great. pricing. Thank you. the to And just one more

second what you were level in I Was first thinking worked the quarter, have quarter? looking similar first fulfilled into of about the think last or in looking as January, that quarter? how you -- seem a that quarter the you out the with now less at optimism your Can more ahead optimism us into April was you tell January? had to

Dino Robusto

Yes, it's or that said programs affinity other what again, umbrella, at definitely, including overall the Yes, lines, I was comp that aside you first D&O quarter, it's it's healthcare you the even whether which the you work look X know -- it's up -- auto X as property, earlier, said, put was it private, I the points points. in negative, had Gary aside take and put

mean, comp, continue negative D&O I one benign mean, so end to as -- in relative and, put we profitable, had get the on work had up particular, highlighted relatively the broader, but even out the work to it anticipated. D&O I comp. within public loss that perspective, in right, a public the lot in to up, because it that's drag that again, the there embedded playing on it's volatility So cost double more you but and got you from rate I very trends Notwithstanding, our we've did it digits, but benign trends be see the

Operator

[Operator will our question take Meyer Instructions] we next Shields And KBW. from with

Meyer Shields

Two severance the associated of Is expenses other or over any out claims words, three three for quantifying quick quarters? that savings take we real first way quarter? with there should the in the In next in questions. the

Dino Robusto

it's say probably Yes, I quarterly of mean, a rate, I run couple million would Meyer.

Meyer Shields

Okay.

Sorry.

income the broadly that, saw talk again the and portfolio of life curve. just yield in could flat was I given you So about the fixed extend, duration we hoping

And sale could of for that all, you longer through process thought is coming first, So the if from the fund hedge take second us the proceeds? duration?

James Anderson

Thus in is the portfolio. from hedge it's all not the P&C side. first, fund the fund hedge Yes, coming portfolio

Group have up the rates as move duration relatively our looking we're for time for quite there some been liability trying the Life we're to we've been duration incredibly short this against now in what down quickly. future, not ourselves & going at just to coming and we're portfolio So position is,

In the fact, anticipating, right direction it's to. we on It's hopefully just in in direction here. very turn rates wanted getting difficult to a more do that even based move if that

Meyer Shields

Okay. Yes, workers' us something in happen should of (ph) that Is that? part was decrease hopefully that or X% the the in mean, I me point surprised The rate that time. in there say, some is story commercial. I or surprised will small compensation at else only

Dino Robusto

comp workers' primarily, that. driving It's Yes. that's

Meyer Shields

so much. you Thank Perfect. Okay.

Dino Robusto

You bet.

James Anderson

Thank you.

Operator

And we this phone time. questions have at no additional

conference any additional like Mr. would remarks. closing back for or turn Dino I So, to Robusto to the

Dino Robusto

Well, joining again in that's we'll great. talk much. quarter. Thank you and to very for you Thanks us a

Operator

and this call gentlemen, we Ladies your and today's you participation. concludes thank for

You may now disconnect.

CNA Financial (CNA) 29 Apr 192019 Q1 Earnings call transcript