CNA - Earnings call transcript Q4 2020 | CNA Financial Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to CNA’s discussion of its 2020 fourth quarter financial results. CNA’s fourth quarter earnings release, presentation and financial supplements 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, we will open the line for questions. Today’s call may include forward-looking statements and references to non-GAAP financial measures. risk 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 risks contained the Information is CNA’s filings. SEC earnings most in and

In during today, February 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

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

During be the next accessed on week, the call CNA’s may website.

this If CEO, not please I will you the Dino are thus errors reading and a call for the the reviewed turn materially that transcript it may of to of intent transcripts could With contain CNA’s meaning Chairman transcription call, Robusto. that statements. the that, accuracy, over may note be alter or

Dino Robusto

performance quarter an our Thank and our you, to pleased Marguerite. year share what am Good everyone. results and year. I in was fourth morning full unprecedented clearly

Importantly, and us our to commitments. hardening effectively as effectively advantage agents as our brokers, the our have of and conditions. needs market deliver the continue employees served CNA and challenges meet very proud our of I’m well on well our the rose to insurers, positioned to industry take who of

XXXX net of $X Core The charge detail million, elevated per losses $XXX million the Before for $X.XX compared to pandemic year. to million we million catastrophe XXXX in attributed compares $XXX highlights for billion pre-tax was million XXXX. in quarter to income which was $XXX included shortfall catastrophe few from million prior year share, income in reserve of the second impact respectively. full the the of announced that as of of the I our the $XXX on $XXX the $XXX and provide $X.XX losses primarily the This quarter, a here and year for are share. or or was per

million underlying On year our ratio fourth came both the underlying It and the combined X.X in as ratio. of the underlying the improved profit underlying the improvement in the to P&C hand, XX.X%. other ratio underwriting ratio. for improvement combined the from The is full year expense consecutive to the loss $XXX increased ratio XX% combined points

up prior our XX% of than almost increased for more full essential Our substantial and premium XXXX. ratio was the underlying were the reflected achieved a expenses I from managing second of of our in year, year. make XX.X%, favorable the growth for construction such in insureds to shelter-in-place X.X manufacturing, catastrophe three for points the year. as improvement the in as X% points impacts improved the Gross XXXX because, and ratio rate grow which investments exposure The rate the which economic We talent, loss with and the from for we technology Net healthcare, development. points losses double continue shelter-in-place are all-in ex-captives meaningful as flat muted and to period written successfully claim and increases portion frequency improved to from frequency XXXX despite of The X% X.X business from which disciplined approach said restrictions. reflected points our Half of directives. business industries expense new our not The was increases, was full combined on the call, premium written a XXXX the relatively X% reduced subject us quarter year. prior benefit X.X grew downturn, XXX.X% point ratio to the analytics.

we cost trends. hardening our run full were margin continue our to achieved written loss run rates earn was out loss in while else this leverage cost rate XXXX to points the all long long for on to an basis trends above earned XX% as four build continue year, about We market equal eight of The points.

be strengths, nor how on the margin particular impact therefore course. not act to staying any inflation. However, as reverted due to we court before, have disruptive are I said pre-pandemic we global going in the has pandemic’s on continue obfuscating prudent we Moreover, economy dockets to claim are social activity, have the recovered to

growth execution quarter, fourth strong business double-digit rate, our the every loss ratio. the ratio business, improved strong to and including improved Turning as in of as retention, in and evidence new underlying results expense growth, significant quarter driven our aspect well an our by

driven was the a improved increase benefited underlying Net share strong a of was profits. increase the over underlying years. largely which $XXX commercial, in was also $X.XX slightly $X.XX was than in underwriting to million Core XX.X% two income million by XX.X%. to which million a which international, income increase underlying XXXX’s $XXX improved for per CNA improved ratio significant and over both quarter ago, quarter all-in per an $XX improvement the combined was of quarter. P&C prior The ratio over low and compared for points fourth from year’s The year XX.X%, combined quarter. catastrophe ratios last fourth or quarter over an the record driven $XXX million, QX more quarter to performance. of and X.X The are year best points two investment fourth We a the fourth share, of combined XX.X%, X.X quarter and by was results, XX with results improvement had line has points

$XX they the combined Pre-tax a had losses Although X.X strong period very were specialty catastrophe benign the of points ratio million prior ratio. combined year XX.X%. fourth at or of favorable had less a quarter development ago, in

was improvement unchanged year-over-year at point quarter. XX.X% million Our XX%, combined the X.X the loss QX. slowly, was Prior ratio we ratio impact to $XXX in than the unfold no was losses on better activity we claim we COVID-XX continue maintained underlying for year was fourth as had approach to business. the a quarter are Specialty as ultimate managing points to development from with period disciplined consistent estimated international continues expenses ratio grow quarter, XX%, as In prior quarter, and The expected. expense as the the XX.X%, a the X.X commercial and was XX.X%.

are We through commercial plus-XX% at the with continues the London to specialty the operating fueled quarter strong earn significant and with growth improvement also that in in contributions our our across was plus-XX%. as we International segments, strong pleased written drive captive ex-our out strong and Gross premium expect all plus-XX%, rate by in at XXXX, grew with improvement. and operation XX% at to quarter additional Canadian rate increased XX% premium for written in In hardening P&C the the by quarter. as growth the total business new while persisted operations. our at at at and our our double-digit market Net with continued evidenced XX% plus-XX%, in points rate achievement quarter. international plus-XX%, increasing to of rate the retention three and third specialty from We commercial achieved by plus-XX%. plus-XX% the board across strong business quarter,

conditions In slower prevent the for soften. important they to and unintended improved to addition terms strong portfolio. are coverage, to we tighter typically ratios, to achievement as improve help conditions pricing attritional equally as mentioned These to our market quarter, rate start double-digit loss before, terms across implement I relaxed conditions, are once continued be and have and

Specialty in slightly while and negative. international fourth business was grew higher commercial XX% growth remained compared strong quarter, to XX% New the XX%, quarter. last year’s

policies, when We target time profitable renewal portfolio segments. our grow we and new liability has construction stable and to rate the we obviously our monitor relative we contributed are specialty we management quality get commercial, commensurately the renewal all growth and segment portfolio, terms to within have market pricing new very a our affinity business the at We to accounts conditions. new excellent to Examples, writing overall grew relativities carefully across continue high profitable portfolio, and indicating business building new year within our increased are in business. can on been on

We in to it these hardening conditions grow market we and is time grow. indeed believe are best positioned to the well

the opportunities the causes our brokers out the in have insured In ferrets agents but improving conditions, high disruption and investments re-marketing have hardening by and we and needed specialized improved terms more business to restoring deepen provide our as pricing, able are secure all tremendous and in years opportunities, and new addition customers. of broad we also market from levels solutions quality to dislocation these a few the expertise we been last made underwriting to to leveraging

$XX Finally, million, to had pollution core life asbestos compares provide asbestos turn and more non-economic million, it we will of annual and income on also a our resulted year’s well Al. $XX our group review. million as operations. will as over that, I With detail and completed our Al and pollution review, in this reserve of we $XX from after-tax of charge after-tax last positive to which charge which

Al Miralles

Thanks and everyone. Dino, to morning good

the life more I As and environmental well our group results segment, the Dino provide as mentioned, including reserve as asbestos will review. on detail corporate

XXXX. that, year do a close ratio made me operations. highlight $XXX million, results. I the ratio. period, contributor few significant progress well overall higher related the items the Core highlight for with to to would Before let results record expense about to quarter the improvement. Dino profitability. for a certainly at to meaningful the like our are we progress income XXXX advancements P&C A upon was our core underlying as and the XX% during made as combined our spoke underwriting to regards with a build XX.X% pleased quarter the than just this prior was ROE With our of I

as and expense ratio reflected segments, respectively ratio Our on XX% three of two basis progress well all XXXX. quarter. notably three sequential as international improvement a fourth in during of quarter business expense P&C basis our a quarter points reflects the was improvements year versus The recording especially significant of prior in year-over-year on

investments we our pleased Considering acquisition XXXX. is the premium the progress expense dividends. and part and strategy progress Likewise ratio growth efforts re-underwriting specialty our while with results commercial, grow significant earned being reflects back international in respect the paying to have disciplined particularly ratio on made the are our business. the of on expense would that expect reduce as premium, making net costs trajectory further expense ability to we of to the our our into spend aid will our about with our We also as written

was adverse favorable flat by prior quarter points during within and on development to offset period to by Turning the the in liability compared specialty X.X P&C net development professional general Favorable of was in development and commercial. net QX development quarter development reserves, prior management premium XXXX. fourth period for driven overall liability

essentially the For versus XXXX, points overall favorable development development in X.X year XXXX. flat was full of

loss no our COVID review quarter. continually our estimate COVID of catastrophe is estimates loss we IB&R. established We of terms the all to our ultimate virtually reserves changes appropriate, our estimate made in still In our loss have remains and and reserves, during previously

to more business. casualty reinsurance with treaties on current to P&C X main Finally operations, of January lines ones being several for favorable These liability given renewed regards with of the our renewed, were treaties and expectations terms conditions. conditions relative market and management

in life Favorable million. relative year million experienced care reserve Now expected to for the $X produced full relative XXXX morbidity with core better the and turning This year the segment a the for XXXX group, full XXXX COVID-XX. $XX current in than $X XXXX as of effects long year, prior the quarter charge $XXX income in year. and compares as and to to well million amid reflect term results XXXX lower QX of loss of this the full-year of loss million

Specifically, claim since largely the severity frequency, term more mortality being as The the care terminations than favorable of elevated health an favor and policyholders higher by recoveries. experienced claimant level claim of home claim of usual COVID termination, facilities. versus onset claim use long is and higher level we’ve lower care driven new of

approach the recognition quarters, reserves. income trends, in we’ve and been holding we’ve perspective, uncertainty cautious taking from a a higher accordingly level of the referenced given As these IB&R been of an previous

mind, experience assess extent we valuation any assumptions. well, annual to of ongoing in the our these XXXX, all into we build the reserving to this persist of premium As beyond which are not favorable claim trends this pandemic. closely completed in may favorable of evaluating review With our gross did they in third quarter

fourth this annual full million our in compares XXXX asbestos review the $XX reserves costs the year. Our and non-economic existing The and on loss the segment during million The environmental of in QX reserve $XX charge million higher review for the indemnity the $XXX claims, $XX to compares and quarter. full was produced non-economic charge a after-tax by the loss concluded associated included million with a of driven and of $XXX million last strengthening defense results million. XXXX. corporate driven a core by of year’s QX $XX loss for XXXX loss for year of This to quarter

Following transfer billion $X.X in review, of we our and $X we of losses cover billion. the cumulative this limit now that purchased are well paid have losses billion, incurred within XXXX, at loss portfolio $X.X

years’ under benefit incurred the covered that only recall reviews with we we this the timing to in losses a there of as is paid OPT to while limit, cover relative from can the losses to previous will You recognizing recovered be to proportion the continue do so respect under treaty. difference

today ultimately be paid the catch with through up recaptured deferred amortization will losses. of As time the losses as such, the over accounting loss incurred recognized gain

been excess has worker us potential transaction portfolio in X. forward a on for our February As reserves. operations focus previously closed transfer Enstar the entered reserve transaction volatility. over and The non-core legacy years related XX Corporation runoff This into going reducing transaction loss with portfolio to and comp while strengthen enables to on subsidiary announced, future we’ve a

Going associated forward, transfer loss we’ll impacts portfolio report and this with the segment. the line corporate through the of associated business

and compared investment pre-tax favorable fourth net prior was million our in the the year prior net offsetting lower the quarter. million quarter in now The yields. results attributable equity partnership year the $XXX $XXX income more investment than common relative our [indiscernible] more with to decline investment Turning to from fixed reflected investments, from and returns in income portfolio income to limited portfolios

years our rates years the Pre-tax from our was during at unrealized holdings X.X% fixed rates of full $X.X group point the liability XXXX. investment life as assets to compared year billion interest net stood quarter in had fixed certainly headwind pre-tax of end. income billion income on with compared year lower reference, which Though X.X% the QX in end, QX XXXX our effective income yield our $X.X net have a was of on the gain across XXXX. at at for income, unrealized of it’s billion billion also change the for of have X.X that our liabilities was effective Fixed invested As a $X.X effective portfolio, year. P&C at prior increase assets been income end. low. fixed the up $X.X quarter support that position driven income was the duration remained while and an at $X duration quarter The quarter of the and of spreads our third the X.X of at support at end the market by tightening end billion driven credit [indiscernible] The investment

As usual, from details investment investment of of you presentation our additional the earnings results and portfolio. composition slides the our provide with will

unrealized X% Book the $XX.X dividends grown very value the during by was over sheet income our comprehensive impact continues balance other has share, quarter per shareholders’ accumulated quarter. be ex-AOCI the year. share. increase in excluding and $XX.XX of billion excluding At billion equity per was to paid $XX.XX $XX.X or or share last equity solid. Our reflective of end, gain per Shareholders’ position the

structure We improvement maintain ratings. the QX with XX% at flow driven significant $X.X billion capital to target a basis, and paid lower capital million the $X.X losses. a quarter, full to a below accident $XXX year increase fourth $XXX substantially compared cash leverage billion of a have ratio and current of in XXXX, was in by operating during versus profitability million year a cash levels In for underwriting was XXXX. flow level On operating conservative our above strong support continue our

and in withstand have In term to business flow, significant and and investments to addition cash sufficient we obligations the our liquidity of operating cash meet form variability. liquidity short continue to strong maintain

$X.XX. confidence Finally, upon our strength. announce our an pleased build regular reflects increase underwriting to grow quarterly in we to increase are to we This continue dividend our our that can financial and profits

of In With turn I a it special addition, our back Dino. share. XXXX, catastrophe the declare results, year including per elevated in notwithstanding to to of will pleased an dividend extraordinary impact were we on $X.XX that,

Dino Robusto

opportunities Thank hardening as are continue we the With we as market throughout ability to are as summary, leveraged and income to our had XXXX. take we the year, from questions. so we these the confident generating market, great quarter to you effectively in core persist that, In we a Al. conditions in do happy record did your

Operator

Gary comes [Operator first from from Please ahead. question instructions] & go Ransom Our Dowling Partners.

Gary Ransom

Yes, good morning.

adequacy, perhaps On comment leveling the the you rate trajectory. take or approach maybe the wondered the to starting could of on to in that rate the outlook, you that see trends if next do increases, rate is fact that down few some you are on closer will loss over out quarters? start drifting what Just lines market

Dino Robusto

good a it’s question, Gary. Yes,

the P&C, I points any in might example, - some achieved and think--you three further see different three going I increase go overall some double-digit as the I after, at a we be better see so of double know, Look a more mix you in of to down, hardening stay XX% flat rates evidence have it as quarter, where rate can up or less ones I you’re also terms can way market. going one will digit and sub-segment, quarter go rate rate, it’s our an of which at because might the actually quarters to sustained retention, invariably lines think see of need a you’re and profitability, for and even that some conditions. in accounts, going with

at were in rate, you we we got that quarter different the got strong As where higher. rate look and areas

eight elevated the--you it’s know, think quarters in the dynamics management fourth I might all talked interest and highest, history Healthcare, quarter environment, think quarter I book, trends, the of on to rate, of does of again on quarter, all move the low the actually, XXXX, rate of some market fluctuation was liability in to financial of quarter. this the but Our cost that cat, it institution about, conditions to the going the quarter. rate based you the persist and COVID, rate everyone loss see albeit has is double-digit

January see of look time about. think take going activity flatten lot in see needed start at so will the really--we the the As a I when of it’s sure to it we quarter. dynamics but been opportunity Gary, we how out, persisting, really frankly, some all and, sees everyone’s January, to talking that because just--our there’s to up I market not make it’s quite and That’s I’m

Gary Ransom

can that, the a need-- rates, you from deficient take still--generally I think So is there’s that still market has

Dino Robusto

Yes, yes.

Gary Ransom

--for rate above loss cost?

Dino Robusto

I going do, you’re that XXXX. to and see in I persist think

Gary Ransom

Okay.

question frequency I Another maybe guess distortions your and is ended the versus ’XX of be on Does lower payments loss some you bit little of the reduced and XXXX. with there’s more overall would proportionately In case mean either that loss numbers, reserves If courts the at of or at we assume end were in ’XX? year that the at higher a I reserves picks, look closed looking would the mix places. IB&R? reserves, because

Al Miralles

this think Gary. I take Yes, that’s Gary, fair, that can is I morning. Al. Good -

particularly paids indeed cat our a of so cat, obviously and profitability, underlying are but at higher are we our as our flow, some reserves as of reflection that incurreds cash paid are cash that well look of which including you and is our our up you stronger a If flow down can paid our up. - has year-over-year, and was COVID, see out, obviously operating been not well down level to had

Gary Ransom

prior in picks, trends in saw or just did thinking years, XXXX loss were you build kind XXXX, you how what ignoring you picks? picking those When were your or of from about more in the you less loss

Dino Robusto

the and COVID social pandemic, loss the picks. on actually structure umbrella, year, the increased it’s calls clumped our articulated so every this call, which on on had XXXX well medical of, Gary, rest benefit, function XXX increased areas on points run picks, prior it acknowledge elevated court several we just--we so that seen--we loss we of malpractice our and we like our some to you’ll some We inflation had stayed dockets pretty and were I’ve we and as particularly recall we hits, the of course had I quarter, in and as as Dino. basis and long into had etc., Prior had the up we about said prior. indicated from over indicated, the a go held just it and cost

bit just hang we by more over margin portended to rates that get until onto going loss long is little trends We’re cost run that clarity. a

as remarks. going think take it’s in said time, some to I prepared my still I

Gary Ransom

All right, thank very much. you

Dino Robusto

Thanks Gary.

Operator

go from comes question of Josh from next America. Bank Shanker ahead. Please Our

Josh Shanker

decision economic dividend at everybody. talk how could behind morning good What factors wondering Al, with calculated long the if the math the you quarterly is a little dividend, dividend. I’m about conjunction the run this in the Great, sort you bit raise versus year’s special were the dividend? of to looking

Al Miralles

in and the this going we’ve we’re approach out otherwise, Josh, to income, capital we’re to at with thanks - in income net opportunities pay unless keeping case. our look Look is management Yes, our think of majority return net we shareholders, year-over-year to Al. I this in we our strategy, the intent have maximize our going is articulated

in look year, the new at income special, that be declared math income, I as the as well that we consistent. and our you the should been if net contemplate think historically the you for relative dividend XX%, XX% that so of that’s to net

I and changed think approach, of say really I’d that��s terms nothing’s in our what there.

Josh Shanker

how different in years are of changes looking liability Okay. Can Then the are what the you there? on--you reserves. about about talk and talk magnitude general the the development

Dino Robusto

hear didn’t if it either Josh, do that. you can to heard want or you you and feel jump in, so. repeat free I it, to Al, Al,

Josh Shanker

wondering if can and some I’m about made general reserve you you the magnitudes. comments color liability The years about give development,

Al Miralles

million back positive premium effect for look we was and premium would adjustments. development and ongoing on adjustment reviews $XX gone those had adjustments years. and net at That audit adjustments we that general years, some to The stake GL little through few was Josh. a essentially liability, have premium negative Sure, go the just that last

Josh Shanker

from changing about take while I’m that ago, where reserves long-dated business, Can are reserves. yours I the be were talking loss reserves year throughout that, they given recent than they’ll about generally unchanged the am the from a I more talking

Al Miralles

Yes, change loss the in GL. for no period material for reserves

Josh Shanker

Okay, thank you.

Operator

from Meyer go comes question from next Please Our KBW. Shields ahead.

Meyer Shields

bit Good whether any going is hoping Dino, than morning. Great, that just combined impact on book are I of thanks. at composition there could changes Hardy about little that you segments. I’m was a subject your the talk the other to more assuming ratio. in change components would the Lloyd’s

Dino Robusto

our we and to less to evidenced develop lot that there, catastrophe line a six you’ll the portfolio. segments, be do maybe in business in by the cat last States. in the But Yes, what so specialty as you was. of know, at Meyer, we’ve of quarter, indicated been United in months I’d a have is completed XX the process our would and be over more it the which going CNA, re-underwriting biggest largely course see of in commercial and XX to on which portfolio, exposure, biggest activity change leverage fourth The is was quarters. as segments that Hardy property or in a the and specialties course our The segments, a cat used change coming the the in saw be like over particular out exposure, international, cat lot our of heavily to which impacted by six seven lot quarters, the results less with of goal you last it’s to the in the expanding Hardy we side, five, here going profitable lines and impact forward profitable in four in

Meyer Shields

ability looking on the perfect. any done, rates guess question limited assets that Is that - process what term for. Okay, does book? some your to seen from we’ve That’s impact for was a P&C. exactly long partnerships the Al and raise move of care have I I on to life

Al Miralles

get across for imagine a review could and was thanks term limited decided that group. Meyer. given we basically it our a the was life don’t part to assets long sense. front. think end We the through earn anticipate could ability discount allocation, reasonably makes going have going discount on relative for to and our That anything and our I and duration, we wouldn’t so At that’s change move sum the the and and allocation the really rate our modest the care, on Really, that’s that, movement that’s partnerships, there. long of zero Yes, adequacy on QX rate as any to on to evaluation we going parcel to what anticipate to rate P&C material to--given liabilities, of the meaningfully reserve all you on

Meyer Shields

perfect. totally makes That Okay, sense.

sounds line seem if could you product finally, reserve Just were there Does commercial on update the quarter. charges auto, that priced? us it no in like reasonably

Dino Robusto

or loss continuing in been--Meyer, while. didn’t We rate had the auto, on act have loss moving trends about rate of auto, a picks to doing go still need XX for We have Dino, the quarter. that ways on but and it’s direction and we been in cost clearly it’s a strong in the to get on our and quarter to points we right fourth we’ve

Meyer Shields

Thank you much. so excellent. Okay,

Operator

allow one keypad. will Again, one press That’s reminder, As moment question, ask you star, like one a ask to a for to any question. pause time. a on further line please telephone to if to turn no on we signal. the would your star, are the call would back I questions additional There the to at this remarks. people like to or host now closing for

Dino Robusto

quarter. in very a great. and you. That’s much Thank you we’ll joining see for Thank us, you

Operator

your today’s That conference. concludes Thank participation. you for

You disconnect. may now

CNA Financial (CNA) 8 Feb 212020 Q4 Earnings call transcript