CNA Financial Corporation Q1 FY2025 earnings call

• Delivered solid core income of $281 million, with eighth consecutive quarter of pre-tax underlying underwriting gain of $200 million or greater.
• P&C all-in combined ratio 98.4%, underlying 92.1%; gross written premiums ex captives up 7%, net written premium 9%, new business up 7%, rate increase 4%, renewal 6%, retention 86%.
• Core income $281M, pretax net investment income $604M (in line with prior year).
• Reduced limited partnership allocation in Life & Group portfolio by $300M, redeployed to P&C portfolio with fixed income securities.
• Solid balance sheet: stockholders' equity excluding AOCI $12.1B, operating cash flow $638M, regular quarterly dividend of $0.46 per share declared.

Commercial

• All-in combined ratio: 101.1%
• Catastrophe losses: $86 million, adding 6.3 points to combined ratio; unfavorable prior period development: $53 million, adding 3.8 points
• Underlying combined ratio: 91.0%, up 0.2 points vs prior year quarter
• Gross written premiums excluding captives: grew 9%
• Net written premium growth: 12%
• Rate increase: 6%, renewal premium change: 7%
• Retention: 84%

Specialty

• All-in combined ratio: 95.1%
• Unfavorable prior period development: $10 million, adding 1.3 points to combined ratio
• Underlying combined ratio: 93.8%, consistent with fourth quarter
• Gross written premiums excluding captives and net written premiums: each grew 6%
• New business growth: 19%, strongest in three years
• Rate increase: 3%, up two points vs last quarter
• Retention: 89%

International

• All-in combined ratio: 95.4%, including $11 million catastrophe loss (3.6 points)
• Underlying combined ratio: 91.8%
• Gross written premiums: flat, but grew 4% excluding currency fluctuation
• Net written premiums: grew 2%, 7% excluding currency fluctuation
• Retention: 85%
• New business: up 22%

• For full year 2025, expect expense ratio of about 30.5%.
• Expect fixed income and other investments income ~$555M in Q2; full year 2025 expected to be ~$2,225M, a 2% increase vs 2024.
• Potential volatility in limited partnership and common stock portfolio due to recent public equity market volatility.

• Elevated industry catastrophe losses impacting combined ratios.
• Tariff policy creating macroeconomic uncertainty, potentially increasing loss costs in commercial property and auto physical damage.
• Social inflation affecting commercial auto in construction book, leading to elevated bodily injury loss cost trends.
• Protracted period of rates below mid single-digit long-run loss cost trends in Specialty's financial and management liability lines, portending margin compression.

Q: Did you perform a reserve review on workers' compensation this quarter?

A: In general, we review each line of business twice per year. This quarter, we did not review workers' compensation. Workers' compensation is scheduled to be reviewed in the second and fourth quarters of 2025 along with several other classes of business. The $1 million of unfavorable development we reported in workers' compensation this quarter was associated with small changes in the tabular discount.

Q: Can you comment on the potential impact of tariffs on your business?

A: The U.S. tariff policy dynamics are creating a significant amount of macroeconomic uncertainty. The biggest direct impact we would expect to see in the short term from increased tariffs is higher loss costs in areas substantially exposed to cost of goods sold inflation such as commercial property and auto physical damage. The magnitude will vary depending on the claim cost mix between labor and materials. We would also expect some mitigating impacts -- as an example, we would expect to increase valuations on property in response, similar to what happened in recent periods of higher economic inflation. We believe we are well positioned to navigate the future impacts with regard to tariffs.

Q: Can you provide more color on what you are seeing in commercial auto in your construction book?

A: The commercial auto business within construction is comprised of heavier vehicles that generate a higher proportion of the types of bodily injury claims that have been particularly susceptible to the effects of social inflation in recent periods, resulting in elevated loss cost trends.