CNA Financial Corporation

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Thank you, Rocco. Good morning and welcome to CNA's discussion of our fourth quarter and full year 2023 financial results. Our fourth quarter earnings press release, presentation, and financial supplement were released this morning and are available on the Investor Relations section of our website, www.CNA.com. Speaking today will be Dino Robusto, Chairman and Chief Executive Officer, and Scott Lindquist, 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. Any forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made during the call. Information concerning those risks is contained in the earnings press release and in CNA's most recent SEC filings. In addition to the forward-looking statements, speak only as of today, Monday, February 5th, 2024. CNA expressly disclaims any obligation to update or revise any forward-looking statements made during this call. Regarding non-GATT measures, reconciliations to the most comparable GATT measures and other information have been provided in our earnings press release, financial supplement, and other filings with the SEC. This call is being recorded and webcast. A replay of the call may be accessed on our website. If you are reading a transcript of this call, please note that the transcript may not be reviewed for accuracy. Thus, it may contain transcription errors that could materially alter the intent or meaning of the statement. With that, I will turn the call over to our Chairman and CEO, Dino Robusto.

Thank you, Roliza, and good morning, all. In the fourth quarter, we produced very strong results, capping off another great year of excellent underwriting performance and robust investment income. Growth written premium, ex-captive growth, was double digit for the quarter and for the full year, representing our third consecutive year of double digit growth. We achieved a 39% increase in underwriting gain for the quarter, which included modest catastrophe losses, and we achieved record underlying and all-in underwriting gains for the full year. Net investment income before tax increased to 21% and 25% for the quarter and full year respectively. And importantly, in the lines of business with elevated lost cost trends due to social inflation impacts that we've commented on over the last several quarters, renewal pricing continues to keep pace with lost cost trends, and we expect that to continue as we move into 2024. I will focus on the fourth quarter, but I will also provide key highlights associated with our full year results. Core income increased by $97 million in the fourth quarter to a record $362 million. Net investment income was $611 million pre-tax, up $108 million over the prior year's fourth quarter, with our alternatives portfolio and our fixed income portfolio contributing almost equally to the increased income. Our P&C operations produced a core income of $434 million, up $92 million in the fourth quarter. The all-in combined ratio improved to 92.1%, a decrease of 1.6 points compared to the prior year quarter, reflecting relatively benign pre-tax catastrophe losses of $22 million or one point of the combined ratio and favorable prior period development of 0.3 points. The PNC underlying combined ratio was 91.4% in the quarter and represents the 12th consecutive quarter it has been below 92%. The underlying loss ratio in the fourth quarter of 2023 was 59.9%, consistent with the fourth quarter of 2022. The expense ratio of 31.2% was up slightly from last year. As usual, Scott will provide more details on expenses. In the quarter, we continued to achieve strong production performance with 10% growth in both gross written premium ex-captives and net written premium. Renewal premium change was 5% in the quarter, down a point from the prior quarter. Earned rate and the portion of exposure change that acts like rate was largely consistent with our estimate of long run loss cost trends, which was unchanged this quarter. Let me add some additional color on the pricing environment as the individual lines within PNC are at varying stages of their unique cycle dynamics, given their respective loss cost pressures, different starting points in terms of profitability, and the cumulative rate level changes achieved in recent years for each line. Lines of business that have been impacted by social inflation have seen rate increases accelerate over the course of the year, like excess casualty, where rate was up double digits in the fourth quarter compared to mid single digits in the first quarter of 2023. Similarly, commercial auto pricing continues to accelerate, with prices increasing 14% in the quarter, up five points since the first quarter. Workers' comp rate change was low single-digit negative, given the continued strong profitability. Importantly, we are benefiting from six points of exposure change in the quarter for work comp, and a good portion of that exposure increase is acting like rate. In our property line and the national account segment, we saw deceleration in rate increases in the quarter, but they were still at positive mid-teen levels. And when you consider that rates in national accounts property are up cumulatively about 140% compared to five years ago, the moderation in increases in the reinsurance and primary market still reflect a very favorable environment in property. Within management liability, our D&O lines continue to experience rate decreases in the fourth quarter, but we're less negative than any other quarter in 2023. We are hopeful that this portends some further moderation to avoid eroding the hard-fought cumulative gains in D&O pricing since 2019 that we believe need to persist. Cumulative rates for D&O overall are still up over 50% from 2019 rate levels, and for public D&O specifically, they are up roughly 75%. All told, I see the competitive environment as largely rational, and I would expect that to continue heading into 2024. In the quarter, new business growth. was 16% which was the highest it's been all year and was driven by commercial where we capitalized on strong pricing and an excellent pipeline of new business opportunities. Retention remained high at 85% this quarter, up a point compared to last quarter with strong retentions in each of our business units as we continue to lock in favorable rates as well as terms and conditions across the portfolio. Turning to our three business units, the all-in combined ratio for specialty was 90.8% in the fourth quarter. The underlying combined ratio was 91.4%, up two points driven by the expense ratio, which was 1.7 points higher compared to the prior year's quarter. with the mix driving higher acquisition costs as well as some additional employee-related costs. The strong underlying loss ratio of 58.6% in specialty has been stable for the last three quarters. Gross written premiums, ex-captive growth for specialty was plus 1% this quarter, and net written premium growth was up plus 3%. Growth continues to be impacted by fewer new opportunities that we have commented on in previous calls and we are remaining prudent on new business in the management liability lines until the competitive environment improves further. Our profitable affinity and healthcare businesses continue to produce mid single digit and high single digit rate increases respectively, staying ahead of lost cost trends for those classes. and surety continues to produce very strong profitable growth. Retention was very strong at 89% for the quarter, with each business area and specialty achieving high retention levels. Turning to commercial, the all-in combined ratio was 92.9%, the lowest in 15 years. The underlying and all-in underwriting gains were the best on record. CAT losses of 17 million, added 1.4 points to the combined ratio, and the underlying combined ratio was 91.6%, a 1.1 point improvement over last year. Gross written premiums, ex-captives grew 20% in the quarter, and net written premium growth was 18%. New business grew 38% and was broad-based across the commercial segments. and retention was 83% in the quarter, consistent with the last quarter. Renewal premium change was 9%, consistent with last quarter, with the rate up 7%. Renewal premium change, excluding work comp, was 11% in the fourth quarter, continuing to readily exceed lost cost trends. For international, The all-in combined ratio was 93% in the quarter, with about a point higher of catastrophe losses, but that represents only 5 million of CAT losses in the quarter. The underlying combined ratio was 91.8%, with an underlying loss ratio of 57.7%, which is down 0.4 points year over year. The expense ratio of 34.1% was higher by about a point due to higher employee-related costs. International gross written premiums and net written premiums were each flat in the quarter. International rate in aggregate was 2%, consistent with the prior quarter, and retention stayed consistent with the three prior quarters and a strong 83%. Now let me provide some perspectives on our full year results. For the full year, we achieved record core income with almost $1.3 billion, or $4.71 per share, up 54% year over year. The increase in core income was driven by a significant increase in limited partnership and common stock returns, as well as fixed income securities. Core income also benefited from record high P&C underwriting gain this year and from a neutral impact on the life and group annual reserve review compared to a loss in 2022. Our P&C operations produced core income of $1.5 billion for the year, up 21% over the prior year. Retax underwriting gain was $585 million. and underlying underwriting gain was $818 million, each a record high. The P&T all-in combined ratio was 93.5%, with a record low underlying combined ratio of 90.9% for the year, and this marks the seventh straight year of improvement in the underlying combined ratio. The underlying loss ratio was 59.9%, Consistent with 2022, the expense ratio improved by 0.2 points to 30.7%, the lowest in the last 15 years. All three operating segments produced very strong all-in and underlying combined ratios again in 2023. For specialty, the all-in combined ratio was 90.4% for the year and the underlying combined ratio was 90.7%. Commercial produced an all-in combined ratio of 96%, and an underlying combined ratio of 91.6%, both the lowest on record. For international, the all-in combined ratio was 92.6%, and the underlying combined ratio was 89%. Turning to production for the year, gross written premium growth ex-captives was 10% this year, and net written premiums were up 9%. New business grew by 11% to a record high of a little over $2 billion. Retention was very strong at 85%. Rates for the year were up 5%, and renewal premium change was 7%, with exposures increasing 2%. Before I turn it over to Scott, I wanted to provide a little additional color on two items. on the social inflation impacted lines of business and the adverse development accident years of 2015 through 2019. And second, I also wanted to provide a little detail on the January 1 reinsurance renewals. The impact of prior period development was slightly favorable for the year for P&C overall with puts and takes by line of business and accident year. In terms of the accident year period of 2015 to 2019 that has generated adverse development quite broadly for the industry, in commercial, our general liability line saw some continued strengthening for that period, but was more than offset by favorable development in work comp. Commercial auto, another line heavily impacted by social inflation, had only slight unfavorable development for those prior accident years. In specialty, medical professional liability, which has also had its share of reserve strengthening in the past few years, and we have spoken about this on prior calls, had a relatively smaller amount of adverse development for those older accident years, which was more than offset by favorable development and surety. So overall in 2023, the impact from this adverse period was diminished for commercial auto and medical professional liability, and that is encouraging. For general liability, we had additional adverse development as the court backlogs began to clear and new claim information emerged. And more time is needed given the longer tail duration on general liability before we know for certain if those years are completely behind us. At the same time, other long tail lines like work comp and surety continue to play out more favorably than expected. In terms of the more recent accident years, the loss ratios are holding up well. As we have highlighted consistently, we took a conservative approach during the pandemic years where we suspected that social inflation was merely obfuscated and retained the most of the implied margin of earned rates in excess of lost cost trends. For accident years 2020 through 2022, for the social inflation impacted lines of commercial auto general liability and medical professional liability, in the aggregate, there has been little change to the initial accident year selections. Bottom line, Our bias continues to be to react quickly to bad news, and we continue to take a measured approach to reacting to any favorable indicators in the more recent accident years. Turning to reinsurance renewals, as you know, our property treaties do not renew until June 1. But a number of our third-party treaties did come up for renewal in the quarter. All of the renewals went well. There was some minor movement in Seeding Commission on a few of the treaties, and most treaties renewed with comparable or slightly higher capacity. The economics of our reinsurance coverage and Seeding Commission remain very favorable on these lines of business. And with that, I'll turn it over to Scott.