CNA - Earnings call transcript Q1 2020 | CNA Financial Corporation

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Operator

Good morning and welcome to the CNA's discussion of its 2020 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 Al Miralles CNA's Chief Financial Officer.

Following their prepared remarks, opened up -- we will open the lines for questions.

Today's call may include forward-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 recent those in concerning risk contained the Information is CNA's filings. SEC earnings most in and

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

and measures, Regarding the the other measures information to GAAP in have reconciliations non-GAAP financial comparable supplement. provided been most

webcast. and recorded being is call This

next call CNA's the the website. on During be assessed week may

you on intent If the not this please note errors thus are for it transcription alter reviewed materially or may transcript meaning call, that reading a could contain may of transcript that the be accuracy, the statements.

call Dino and CNA's the With over to Robusto. that, CEO, I Chairman now will turn

Dino Robusto

morning. with Thank and you this families good is It and today you, I difficult very Jennifer. in you well hope to Good time. are coping your be

to I these meet part and in continues challenges to some honored its the nation the an times. that of in certainty am address our provide As world industry by be uncertain commitments brought COVID-XX, a

and CNA crisis, providing economies. grateful all day for workers each essential our all for be workers depend are our services industry every the to U.S. remain behalf and upon. who strong we we work all healthcare On selfless first to in and and advance acknowledges employees, and this courageous and and they day, the thanks continue go goods efforts key of of responders the resilient our factor of recovery During a will world to

and effectively. to to new citizens today CNA embraced And manage I to our respond this government have keep to working our across acknowledge to grateful nation, leaders our this to am also the work who tirelessly environment I sent who would and pandemic. continue operations are business employees

relate results, how to to We industry issues the will I COVID-XX on thoughts quarter surrounding the add my and early that turn our following now will portfolio.

our results offsetting and quarter strong performance, investment of is underwriting strong to impacts price underlying first U.S. our economic the operations, to continue reflect loss underwriting accelerated in the in where due portfolio increases, Our growth robust the COVID-XX. performance

the Core losses million P&C or which $XX for included million the The XX.X%, ratio combined per was was $X.XX share. income quarter for were to due $XX $XXX quarter cap pretax, COVID-XX. million

in The point improvement lower the the first underlying a little XX.X% reflect from underlying one quarter. of half largely first ratio is more QX of a stronger improvement and which combined is quarter is premium. to the prior XXXX. was and a year XX.X% was ratio first the ratio expense quarter XX.X% This was due slight the to loss The in The quarter, quarter earned than point XXXX. than first net both from the

for the been calls, prior even in has flat reduce strategy discussed invest have while positively tenet positioning future. us we hold As of we and while our continued to technology the the and strategy to impact one leverage to numerator analytics and well has growth results, The ratio. the talent, our ratio expense in

Net Gross the growth written the for in plus premium was was growth quarter. written ex-captives X% plus U.S. X%. premium

international, For completed this plus of largely by be gross we and both which overall, will X% which numbers before were re-underwriting respectively, plus mentioned P&C X% the the impacted have in year. were as

financial very largely at growth in aging was gross services was management X% Specialty our institutions, growth liability offset ex-captive. in premium premium written Gross growth in portfolio. written by strong our underwriting actions and XX%. segment plus Commercial Strong was plus

Our International gross of segment premium had decline X%.

Our dynamic exactly rate planned. as retention is and

our are in of retention most and of business. portfolio of is that increase rate cohorts rates and parts our of profitable strongest level We are achieving the need the our most strongest in

point from and one to Rate pattern quarter, increases are the continuation we were two stable quarter. see over and very the X% This all larger increases last continues of of years, rate to fourth increases virtually up in segments. happy growth the of rate

two due strategy, lower while XX% to X% than fourth points aging this in grew quarter services year-over-year. international largely the our Retention new quarter the quarter, was by business

I this have at success recruiting the periodically first our particularly top emphasized in true and talent was quarter.

to will our our seen to in past be because named who next our few introduce Al Bob months be the Officer, Daniel to with Chief Miralles, are veterans fields. and addition will In Actuary top CFO, industry Chief expertise and releases deep both the have over new I their respective press shortly, hopper we Franzetti new Claims our you

Mahmood We XX cyber than that application in more Officer as are our brings us joined also highlight security Security years pleased cloud experience has security. the and with Information of Khan to Chief

Al. I to back him welcome to Turning call. analyst want our

that that our You our being from Officer moved Chief being will Miralles had recall CFO. we announced Al to Risk

strong our for am and in managed and us background also In with finance arrived long-term I I years. expertise worked CAN, addition a has you at interfacing will care value runoff CRO investments him. he's Having a since to confident business several Al with

detail And segment well results, more results. will our as Al on with as our investment that provide

Al Miralles

assume CNA into Dino you, CNA. experiences Clearly, role on overseeing times good period. interesting first the are investments my in challenging everyone. have this also happy including step to position the the to I be CFO morning prepared role me Thank here am treasury these and and today of

development underwriting underlying million. includes Casually core million ratio X.X $XXX period prior This combined of was in income this which was pretax successive quarter. Property the P&C quarter loss of points and mix Pretax favorable XX.X% of of catastrophe million. $XXX was operations points. the fourth first The Our quarter, produced underwriting $XX profit underlying & profit X.X with

of to points of Our catastrophe our COVID-XX losses. impact loss million cap included losses the or pretax X.X ratio $XX amounted within which

expense ratio was combined was the XX.X% and of The XX.X%. quarter ratio combined underlying sixth was below consecutive XX%. The ratio with XX.X% underlying loss underlying ratio

and This point prior improvement combined largely one of point accident ratio for outcomes In X.X by operating compared was ensuring this segments, quarter. quarter from first driven is a favorable ratio catastrophe includes X.X prior. to and combined predominantly period development XX.X% XXXX. The The period losses. favorable points terms our the development of is prior years of Specialty favorable XXXX for

growth the was quarter, ratio ratio improved for in was X.X ratio of to basis. net on Specialty negative underlying X.X expense compared largely of ratios was due written compared net Specialty premium. quarter was XXXX. the loss points written growth combined earned X% XX.X% improvement X% quarter ex-captive and and to premium gross Expense The first points XXXX for quarter this the Underline by first to The of was XX%. XX.X%

four services. up our Rate was compared X% relating year aging was point continue increase which quarter. healthcare X% quarter is at Retention down last a to This XXXX. last largely full and retention to quarter, to business down from XX% to in a due in to points compared drop this

New business is volume and largely healthcare. the quarter down due in to

ratio March. March Missouri The The due for combined ratio and The Tornado largely catastrophe points This across late the points combined includes Commercial cat Michael X.X than was to events, prior of quarter quarter. this XXXX. is losses loss states early seven Arkansas, higher first in development. period in the and other are two storms negligible XXX.X% and

four XXXX. and points on are first XX.X% The points improved X.X was very fronts of the underlying underlying quarter, ratio by to first loss quarter a loss as strong Commercial points. The XXXX this combined ratio underlying improvement quarter by the expense ratio The the for ratio in ratio XX.X% was X.X XX.X%. multiple was results expense and was compared

change premium written the XX%. from last ex-captives The the rate growth Gross in quarter and is for Commercial in a the XX% particularly quarter. was up of three X%, is quarter strong was Retention about XX%. net healthy points

this growth target market broadly quite again strong segments. at quarter XX% is distributed was New business across

and was and improved XXXX. ratio ratio year compared ratio approximately is XX.X% two XX.X%. compared The quarter this lower was to acquisition for costs. The ratio two by due points was combined first first International expense largely underlying the International ratio for The quarter, expense XXXX, quarter XX.X% XX.X% loss was this to full underlying The combined the improvement a was to point quarter. of which

The between re-underwriting was The quarter, XX% the quarter. the was renewal. most gross change, XX% is treaty which International X% consistent for Net written X%. this quarter written this differential reinsurance which strong net quarter. the again change with Rate and premium for of our declined large Retention reflecting gross timing is premium XXXX strategy. declined at of

the Our drivers underlying income the produced quarter. quarter $XX loss Corporate with a million and our And Life finally, were & of $X These our Group segment first consistent in million breakeven in results results. expectations. segment of core produced core the

our pretax million by the million period $XXX the year $XXX to net was produced of portfolios million quarter prior investment driven was change income million equity during partnership to Pretax in year. quarter. which first income $XX of last in the pretax and common The $XXX compared same compared losses limited

investment income million provide net fixed our continues a the holders income quarter. X.X% to $XXX stable prior Pretax million earnings. and this from $XXX for yield in on was compared pretax portfolio portfolio The income quarter effective fixed year was to

million holdings. quarterly addition, the quarter. million stock to credit the of non-redeemable impairments the income by prior gain In These were preferred pretax year investments fixed compared investment of for addition losses in mark-to-market to driven for primarily our were $XX losses $XXX certain

down $X.X the corporate increase Our of billion $X.X from our end across at driven The portfolio unrealized broad billion the market, predominantly the was at in in spreads impacting gain change position income on credit unrealized holdings. of our the by quarter, fixed bond the primarily stood value at year-end.

overall during significant across income portfolio we month impacted While of March. with markets adversely A fixed an value the portfolio our a diversified credit hold rating, the deterioration

were of have markets value income [ph] of the in these shown presumably broadly of credit our signs declined fixed portfolio. April, stability spreads the impacting month As

of a value the basis end $XXX billion. gain common portfolio unrealized $X approximately April, Likewise, in million and by rebound our market non-redeemable stock income has of on the nearly the our increased investments. of equity to increased broader As fixed on partnership, the preferred limited pretax

with connected and The income liabilities Group was of the effective end duration an liabilities years fixed of effective X.X duration Fixed portfolio support Life targets. that P&C and & quarter support assets our quarter at years our end. inline at our X.X

portfolio. earnings the the of Slides you results XX composition provide and additional will details the presentation investment investment in XX of the and

equity and shareholders' of share. strong. per payment during Our end, a was unrealized a gain extremely selective the quarter $XX.X balance At sheet quarter. to It’s special $XX.XX or our decrease billion dividend in of continues the both be position

other during share X% the $XX.XX year-end share decrease quarter. accumulated a for $X.XX or from excluding income of billion share, in equity dividends per was XXXX -- Shareholders' paid the per $XX.X comprehensive shares adjusted and per

adequate in low metrics. We a provides of schedule. and credit balance conservative additional of capital At and continue levels ratings. presentation metrics well a earnings information all capital XX leverage made credit to structure very on maturity end, maintain Slide our debt ratio balanced our supporting sheet remain our quarter target above a the

first the cash was $XXX million. operating quarter, flow In

to and our investment both addition cash access facility operating flow, as liquidity continue positive and our our of liquidity well FHLB ample we within revolving In and of credit. to we maintain investments, term short form line cash credit in maintain to an portfolio have

liquidity not I strong, sufficient you respect significant our of operating long-term flow Slide liquidity additional not obligations thus variability. business meet policy to our our liquidity remained withstand Overall, with earnings with and should cash position the presentation detail have any value constrain and will to provides remind do XX surrenders liquidity that holdings position. and profile. positive care cash policies

And finally, share. our $X.XX to quarterly per I regular of pleased dividend am announce

turn With that, it back to will Dino. I

Dino Robusto

Al. Thanks,

to move perspective of mainly portfolio. The our business forms. call, pandemic the we our interruption on the related we are let claim some received provide date to the notices have and portion Before question-and-answer property to notices me

So, let here. me start

minimis. our in physical small property policies on very damage or barring peril to policies property the international attach U.S. limit few coverage property participation exposed for coverage may policies require a all are issued operation, coverage Lloyd's the de and in but from There exist is the Our direct viruses. for on covered have total a exclusions to where whether

to policy it. such never as exclusionary COVID-XX not for with So, on property and provide coverage business language interruption respect a premium does collect we for

these turn first calls, let of an of our And several book. area services. that to Now, me I the I wanted composition commented to have you aging of remind on during

medical a predominantly liability small coverage with auto. is property and a services professional of aging amount malpractice Our some book

our of write volume coverage. we no Importantly, work is X% a workers' written is comp very deductibles. It essentially over large than and premium comp less it

providers. healthcare workers' This front with broader minimal true is our aging comp healthcare a line liability portfolio, is professional beyond also services, for business to exposure which also

Additionally, like coverage first we don't for responders.

have terms them. Moreover, away on to obtain calls, right I time we prior and we from and some said have the been on as exposures, conditions when the for for have aging could achieve services, we accounts working not walked

XX% year to liability take we is XX% since Our significant started ago current professional exposure action. lower underwriting a and than lower

On we deductibles conditions. and raising retain, rate, achieving significant other policies, been the terms do we and have tightening

We our early services received to And relatively expect our in exposure we insured, these actions but and days we to portfolio. these from to have monitoring situation the date, agent claims COVID-XX mitigate are few notices are closely. this

for Importantly, of notices this should healthcare that a have immunity critical limit these professionals industry. states liability which unwarranted and claims number in facilities, an are enacted against

therapists, physical of classes. pharmacists professional premium within With volume to our non-frontline comes other liability other healthcare and regards professionals, large a similar book, as component from healthcare segments counselors, such our

program. dentist meaningful a have also We

segments, across claims shelter-in-place in have to restrictions. And it's note, to professional other significant seen healthcare due reduction important liability we all reported

to now. Switching surety

know, large construction you with a a are portfolio we commercial surety writer, risks. both successful of As balanced and

Our of smaller any have sizable a historically book economic throughout that commercial compliance conditions. includes surety steadily portion type performed bonds

sound in expressed a of the operations deemed that of long-term Our of participate To largely been group construction accounts the portfolio in relationships backlog most that have having a contractors a extent, orders. continued or economy us. contractor with great the many have have of meaningful have and so work essential, diversified financially the accounts consists parts of portfolio

current are Given we the we the of withstand success theme, to our environment. historical bond believe well-positioned

recovery to with to predict, clarity term impacts. difficult much is more the respect second we our the the of still longer so time length have of course, should quarter Of by call potential any

coverage credit. final The area wanted trade is I highlight to

in XXXX. calls, this losses. have has activity potential than quarter portfolio, our Nevertheless, a this in remains was mentioned less have of to X We in we that portion and prior from runoff placed book credit some first remaining. now in our As see that premium small million Lloyd's I been includes on claim still expect trade part some charge, syndicate

first other work as includes claim's department quarter retained through the this pandemic. The also for charge and we by legal our experts provision

outlook environment has number low A changed. a comments. have not the dynamics protracted of a From the If anything, perspective, there rate do with the the few although, believe last that are market unknowns over fundamentally past hardening I underpinned months COVID-XX, the for XX interest deteriorated.

we movement should current April. So, pace throughout seen I at have think and that in rate the XXXX, continue

hurt premiums in this economic later will expense pressure lockdown be Now, line our our ratio. overall growth put impacted the will from top rate, and year and slowdown, which the also will likely on growth

will every managing expense. on dollar focus of we So, discretionary

in worked we we through to to technology pandemic. also However, this and talent, make expect necessary investments analytics, as do continue

and clarity second at In the impact impact, expense to addition provide. on reserve premium to we you impacts the expect updating of much which end quarter, have more loss top we will line on

to be that, questions. With glad your we'll take

Operator

Instructions] [Operator Yes.

with Blair. Smith to first William go Jeff we'll And

Jeff Smith

it, Good cancellation all? missed you policies if at have did event say any you Hi. morning. have I but may

Dino Robusto

we No. some and have. small coverage we've little International, limits totally on some are may of not That's be at There minimis. looked those de a those but all freebies

Jeff Smith

then And how risk see and much that is in the Specialty about for do Okay. book, Covid-XX? there you of D&O, much

Dino Robusto

for have a cost area an I you it's focused it from As drops for you this I going class and growing. Director tremendous I past, The it's it's drops mean, we've there's activity. been being truthfully, see a stock D&O and stock very is very, to Jeff, & a that large on -- not that you're we look, more that drop. is up and elevated portfolio broad in to is pandemic defense were much going us, accountability some establish been have scenario. end of the action based to think -- price been it but the whenever clear indicated And see we But difficult think the Officer we

Jeff Smith

Right.

the Okay. then mainly pretty warranties? drop-off a demand in big there? just that you are warranty seeing And Is business, vehicle

Dino Robusto

it's mainly vehicle Yes. Yeah, warranties.

electronic programs, We large those captive, you phone we reinsured as know, are also but have captive. the to -- cell have -- all

along you're you that the drop-off cars, obviously, warranty et So, new drop sales the and some with seeing, in on cetera. off see

Jeff Smith

Okay. Thank you.

Dino Robusto

Thank you.

Operator

Instructions] [Operator

will We Meyer to with KBW. Shields go next

Meyer Shields

very morning the thank business. on it you Thanks. Did business for bring line Great. on of disclosure your and charge okay. you -- Good of $XX for much the which book the The applies. million lines

Dino Robusto

I'm sorry, again. it say

Meyer Shields

break virus million quarter, The which first the so down did charge lines business related of the -- you that for? $XX was in

Dino Robusto

Yeah.

you credit, runoff, I million. So, for the we as charge said, have, though a put that on even line actual trade still of is it what's $X business

what as of prices credit prices, put the reviews put credit reserve our that did -- lines, the so going oil a that's on is we especially our dropping strain And all on oil the drop see side, you we trade for there money to losses. commodity the of trade on until

And the the a is typically something big doing we claim’s but department rest are a expert clearly that just catastrophe, costs -- legal the then in size.

And projections in through able as quarter We the for to pandemic, the to to better costs, get to that there It's amount. are we ultimate costs. picture, have Meyer, number put so second estimation the for we as be hope those through a play costs much not of together defense future. like also some defense other any for

Meyer Shields

up you second expect of Okay. wondering, into you presumptions hoping That's stance sort what expanding considerably. states CNA are on all of your on Fantastic. is of do that I'm compensation. general, what was workers' And first wrap come of all, thoughts reinsurance could helpful. I In all, play?

Dino Robusto

Yeah.

Okay.

So, appreciate many the at question so complicated and levels. different obviously

you the the way. on perception protection some million it for a the And give consecutive we hours I'll then, by have work excess my status, an And events. provides XXX $XX of may. time and constitutes provides, can fall million select of I we then of retention. large We do if determine reinsurance for reinsurance, the it combining Meyer, regulatory. losses. to And And sense what the with fortune protection for get comp start Let's on $XXX event period

So, strong, some very reinsurance protection.

Now, do in for the both as healthcare that clear went frontline said, have responders workers. we know in the a portfolio. -- the let's and up comp And look, I officials make workers presumption portfolio. work our you coverage so to supported the want get first doctrines. states I And for coverage be some healthcare And as And small of to comp part a because medical that it's not work through detail, malpractice. very I write presumption

-- we comp have first also We for work no respondent.

by Now there workers, essential to are this in were were not they businesses. few exposures underwritten, opinion, where and a look, costs broader And relatively few significant it's system a for going because be states, unpredicted overall, shouldered being other presumption add, would already to are not ultimately struggling those proposed. fortunately, my priced the

are that’s the we're contractual obvious of So, what extra with doing the themselves we the important subsequent very pushing APCIA IS policyholder consequence broad and companies other is the pushing for availability. because working reason they're many back on member the of of policyholder together And with are groups back groups -- and retroactive.

to is -- that we're wait to going so quarter. suggested why we look, out, the plays see for second And I which how need

have a from the seen We, because claim lockdown. drop workers' compensation in obviously, counts of

whether in in in place. And because of we're nail bit assumption to exposure spite the your on going broad as that it’s very going meantime, to got to to net-net factor So, your the tooth off in nose come got a basis of a then you've the to you little end cutting fight sort see face. avoiding and that's

wait shakes how to this we'll do see how shakes We so, out. to out. really see it And have

Meyer Shields

was you. thorough. very Thank That Okay.

Dino Robusto

thanks the Meyer, Yeah. question. for

Operator

are this time, further no And at questions. there

Dino Robusto

Appreciate be everyone. and Thank and Okay. time please you healthy. be your safe

Operator

your This today's for conference. does conclude We participation. you thank

CNA Financial (CNA) 4 May 202020 Q1 Earnings call transcript