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. 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 release and CNA's most recent 10-K on file with the SEC. In addition, the forward-looking statements speak only as of today Monday, April 29, 2019. CNA expressively disclaims any obligation to update or revise any forward-looking statements made during this call. Regarding the non-GAAP measures, reconciliations to the most comparable GAAP measures and other information have been provided in the financial supplement. This call is being recorded and webcast. During the next week, the call may be accessed on CNA's website. With that, I will turn the call over to CNA's Chairman and CEO, Dino Robusto. Please go ahead, Sir.

Thank you, Abbie. Good morning everyone. I’m pleased to share our first quarter results with you today which are comparable with the strong performance we were generating prior to the last quarter outlier result. Core income for the first quarter was 318 million or $0.17 per share, up 13% over the prior year quarter. Core return on equity was 10.7%, up from 9.3%. This result reflected strong investment performance and a combined ratio of 97.8% including 3.4 points of catastrophe losses. For the quarter, the underlying combined ratio was 94.9%, which reflects continued underwriting improvement on last year's full-year result of 95.4% in 2017 95.5%. The P&C underlying loss ratio was 60.7% one of the lowest levels in a decade as property losses were at expected levels in the quarter down from the fourth quarter elevated level and international loss ratio was significantly improved. Our expense ratio in the quarter was 33.8%, slightly higher than our run rate due to the seasonality of earnings premium. We continue to achieve good growth in the U.S. segments with gross written premium of 5% excluding third-party captives and net written premium was up 2%. In the quarter, International's net written premium was down 12%, driven by lower net premium which was down 29%. This decrease was anticipated resulting from our re-underwriting efforts in our London-based operations that we have discussed previously. We continue to effectively manage the rate retention dynamic, achieving strong rate increases and doing so would improve the retentions in the U.S. In the first quarter, rate for P&C overall was up 3%. In our specialty segment, rate was up 3% and retention was up 4 points to 89%. Importantly, we achieved incrementally more rate where it is needed most. For example, both healthcare and public company D&O achieved 11.3 of…

Thank you, Dino, and good morning everyone. Our property and casualty operations produced core income of 314 million in the first quarter. Pretax underwriting profit was 37 million and underlying underwriting profit of 85 million. Let me just make a point here with regard to the comparison to the prior year quarter. Traditionally, we would provide commentary regarding 2019 first quarter performance compared with 2018 first quarter. In the press release and earnings presentation provides you with that comparison. However, 2018's first quarter was an outlier in terms of both underlying loss ratio and expense ratio. With regard to the underlying loss ratio, we had to two lines property and umbrella with the loss ratios were reevaluated upward after the first quarter last year, causing the full year 2018 loss ratio to be higher than the first quarter and more indicative of current performance. Last year's first quarter expense ratio benefited from a low level of technology spend as we repaired for our new outsourcing as well as the one-time favorable acquisition cost offset. Giving these items, we thought the comparing our first quarter underwriting results with the full year 2018 underwriting results was more indicative of our current trend. As Dino mentioned, our expense ratio of 33.8% is slightly above our current annual run rate. When we look at the components of the expense ratio, our acquisition ratio is at a normalized level, but our underwriting ratio is $0.03 higher than the full year 2018, 13.4%. The numerator of that ratio dollars of underwriting expense is on par with 2018's quarterly average, but the denominator of net earned premium has some seasonality to it and is lower than in the first and second quarters than it is in the third and fourth. In addition to the seasonality and increased…

Thanks James. Before we move to question-and-answer portion of the call, let me leave you with some overarching thoughts on where we are in our pursuit of being a top quartile underwriter. The foundation of underwriting excellences is the loss ratio of particularly the underlying loss ratio and it has been our top priority over the last two years. This quarter 60.7% underlying loss ratio was squarely top cortile performance and reflects the quality of our execution. Moreover, the rate we are seeing today is offsetting our long-run loss cost trends, which is starting to mitigate the headwind that has faced us in recent years and I remain encouraged by the trajectory of pricing in the overall terms and conditions we can achieve in the market. Of course, sustained top quartile outperformance requires us to further improve our expense ratio beyond the roughly 2 point improvement we have achieved over the past two years. And there is more improvement that we had as we continue to grow our book while managing the numerator by balancing continued investment in talent and technologies with finding operational efficiency. Indeed, our U.S gross written premium grew 5% both last year and in the first quarter this year while our underwriting expenses were down over that time period. Although, our incremental reinsurance spend is currently muting additional improvement in the expense ratio by lowering the earned premium growth. This is temporary and a trade we're willing to make at this time to support expanding new growth segment and to reduce potential volatility. Bottom line a very strong underlying loss ratio together with our demonstrated ability to grow profitably while improving the expense ratio, we feel confident in our ability to achieve top quartile performance on a sustained basis. With that, we will be glad to take your questions.

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

Yes. Thank you. It was -- everything was pretty straightforward. I just wanted to ask, I guess on the corporate segment, do you view the 1Q number as a reasonable basis going forward, is that fairly normalized at this point?

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

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

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

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

I think Josh, where we're getting right now, we're well ahead of our loss cost trend, but we were starting from a spot where that combined ratio was too high. So we are making progress on it, but we still have a way to go before we're comfortable getting the appropriate return on that business.

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

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

Okay. Well, thank you. Yes?

It's progressively increasing Josh, right, it was 7% in the fourth quarter, it's 8% in the first quarter and so, that's a good sign. And early read on in April is, the momentum continues.

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

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

Yes, Gary, I think overall, loss cost trends are very stable. So we're not seeing any change there and we focus on the long run loss cost trend. So we do see variation in the shorter term, but long run loss cost trends remain stable.

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

Yes, Gary, hi, it's Dino. I mean that's -- it's a good question. You have to -- when you look at it at that level, you really got -- to it masks what's happening underneath. You really have to take a look at our portfolio and the various segments. If you look at, let's take, Specialty as an example, within Specialty, as you probably know, there is a very large program book of professional E&O that's been very, very profitable for us for a decade. This -- these programs are actuarially priced, experience based. They also have multiyear parameters in them. They don't undulate lockstep with market pricing on individual accounts. And because of its size, it can mask the movements quarter-to-quarter in other lines of business in Specialty, particularly in this case, as they've been going up. So you have to sort of put that aside. If you'd put our affinity programs aside in specialty, pricing is up 6% in the first quarter, up from plus 5% in the fourth quarter. So it -- the other lines are going up and then we gave you some of the examples of healthcare and public D&O. So on the specialty side, it really is a function of our portfolio and in particular, the very large program both on Commercial, it's like you say Gary, it's a lot of it is work comp which has been negative. I mean, the good news on the work comp when you take a look at the NCCI rate filing, the decreases are peaking at midyear and then should start to improve. So you need to take a look at that and if -- and on the Commercial ex-work comp talks about a little bit of the rounding, it's up a couple of tenths of a point. Within there also, small business is different. It too -- it doesn't really undulate like individual accounts. Those are more based on the filings that we do by state and the mix that comes up in any one quarter. So if you really do need to take a look a few layers down and there's some really good trends in there and it's why we're feeling pretty good about the execution.

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

Yes, there is -- in that -- in the first quarter of '18, we had lost a large program that had the threat, the retention from its historically high levels and you're not, so the first quarter of this year against that quarter, it's got it back at its normal levels now.

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

Yes, that was -- Yes, definitely, Gary again, you know you take what I said earlier, put aside affinity programs put aside the work comp which had the negative, and you look at the other lines, whether it's umbrella, it's property, it's auto or as I said, healthcare that -- even D&O overall including private, it's up 5 points in the first quarter, it was 4 points. So that's up, I mean, I highlighted the public D&O because you see a lot more volatility in public D&O and that one had the double digits, but even on the broader, so it did end up playing out as we had anticipated. Notwithstanding, the drag that you get from the negative rate on work comp, but it -- but there again, I mean, we've got to put it in perspective, right, it's very profitable, the trends continue to be relatively benign and, in particular, benign relative to our embedded loss cost trends within work comp.

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

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

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

Okay. Sorry. So we saw again the duration of the fixed income portfolio in life extend, and I was hoping you could talk about that, just given the broadly flat yield curve. So first, is that coming from the hedge fund sale proceeds? And second of all, if you could take us through the thought process for the longer duration?

Yes, first, it's not coming from the hedge fund portfolio. Thus the hedge fund portfolio is all in the P&C side. So what we're looking at there is, we've been relatively short against our liability duration in the Life & Group portfolio for quite some time as rates have been coming down and we're just now trying to position ourselves for the future, we're not going to move up this duration incredibly quickly. In fact, it's very difficult to do even if we wanted to. It's just more a move in that direction based on anticipating, getting hopefully rates that turn in the right direction here.

Okay. Yes, I mean, that will happen hopefully at some point in time. The only part of the rate story that surprised us or surprised me I should say, was the 3% (ph) decrease in small commercial. Is that workers' compensation or is there something else in that?

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

Okay. Perfect. Thank you so much.

You bet.

Thank you.

And we have no additional phone questions at this time. So, I would like to turn the conference back to Mr. Dino Robusto for any additional or closing remarks.

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

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