Good morning, and welcome to CNA's Discussion of its 2019 Second Quarter Financial Results. CNA's second quarter earnings release, presentation and financial supplement were released this morning and are available via its Web site, 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 in CNA's most recent 10-K on file with the SEC. In addition, the forward-looking statements speak only as of today Monday, August 5, 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 Web site. With that, I will turn the call over to CNA's Chairman and CEO, Dino Robusto. Please go ahead, sir.

Thank you, Alison. Good morning, everyone. I'm pleased to share our second quarter results with you today, a good result, reflecting strong execution across the board. Core income for the second quarter was $294 million or $1.08 per share, up 9% over the prior-year quarter. Core return on equity was 9.9%. This result reflected improved underlying underwriting performance, continued pricing momentum, good investment performance, and continued stable performance of our run off long-term care business. For the quarter, the P&C underlying combined ratio was 94.6% compared with last year's second quarter results of 95.3%. The underlying loss ratio of 60.8% improved a little more than a half-a-point from the prior year. The all-in combined ratio of 95.7% included 2.2 points of catastrophes and 1.1 points of favorable prior period development. Our expense ratio in the quarter was 33.4%, nearly a half-a-point better than the first quarter. We generated robust growth in the U.S. segment with gross written premium excluding third-party captives up 10% and net written premium up 8%. Growth was particularly strong in our commercial segment, while international's net written premium was down 8% in the quarter, driven by our Lloyd Syndicate was down 23% resulting from our re-underwriting efforts that will continue throughout the year as we have previously discussed. We continue to effectively manage the rate retention dynamic achieving higher rate increases in each business unit, and doing so with steady retentions in the U.S. In the second quarter, rate for P&C overall was 4%, up one point from the first quarter with commercial and specialty each up one point and international up two points from the first quarter. We drilled down a little more. Pushing for rate increases is the quintessential priority for us. In our specialty business unit, rate was up 4% and up 8%…

Thanks, Dino, and good morning everyone. Our property and casualty operations produce core income of $298 million in the second quarter, pre-tax underwriting profit with $72 million and underlying underwriting profit was $93 million. Moving to each our P&C business units, specialty second quarter underlying combined ratio was 93.2% including an underlying loss ratio of 59.9%, specialty's overall combined ratio of 90.7% included 2.6 points of favorable prior period developments, Specialty's gross written premium ex-third-party captives grew a healthy 6% in the quarter. Our commercial segments underlying combined ratio was 94.9% in the quarter, the underlying loss ratio of 61.7% included a little less than a half a point of onetime costs related to the actions taken within our claim department that I mentioned last quarter as some of the costs continued into April. The second quarter overall combined ratio for commercial was 99.7% including approximately five points of catastrophe losses and a minimal amount of favorable reserve development. Commercial's gross written premium ex-third-party captives grew 13% in the quarter. The underlying combined ratio for our International segment was 97.4% in the second quarter. The all-in combined ratio was 97.5% with a minimal amount of catastrophe losses or prior period development affecting the results. Our P&C expense ratio of 33.4% is representative of our current annual run rate. Let me take a minute to talk about our prior period development in the quarter. Specialty is 2.6 points of favorable prior period development was primarily an accident years 2017 and prior, driven by surety, affinity and warranty and partially offset by healthcare being slightly adverse. Commercial had a minimal amount of net favorable reserve development as favorable development in workers compensation and property was offset by unfavorable umbrella and the normal unwinding of our discounted workers compensation claim reserves. In the…

Thanks James. Before we move to the question-and-answer portion of the call, let me leave you with some overarching thoughts on the quarter. Core income for the second quarter was $294 million bringing the first-half core income to $612 million, the highest level in 12 years. Our 2019 second quarter core return on equity is 9.95. Our underlying P&C loss ratio was 60.8% for the quarter and 60.7% year-to-date. U.S. net written premium grew 8%. We achieved 4 points of rate in the quarter, one point higher than the first quarter. And we are optimistic that the rate environment will continue to be a tailwind. With that, we will be glad to take your questions.

Thank you, sir. [Operator instructions] We will take our first question from Josh Shanker with Deutsche Bank. Please go ahead.

Yes. Good morning, everyone.

Good morning.

Good morning.

Two questions, the first one, you have said that pricing is ahead of lost cost. In an aggregate, your commercial pricing is up 3, but I guess up 5, excluding worker's comp. Historically long-term loss cost trends for the industry sat around 4% or 5%. In the past 10 years, the economy has been more sluggish than the long-term. So, it's probably been less than that, but when we talk about pricing up, 3% in total, 5% ex-worker's comp, is that comfortably ahead of long-term loss cost trends? I mean it just seems to me that is about the long-term lost cost trend, maybe you can give me some color on that.

Yes, Josh, let me see if I can give you a little bit of context here. So, when we look at our long-run loss cost trends, you have to keep in mind that it's reflective of our -- the makeup of our portfolio. We have a significant component of our portfolio in our, what we refer to as our Affinity business that has a lower than normal long-run loss cost trends, actually, it's around 1%. So when we look in aggregate at our portfolio loss cost trend, it's about 2.5s point when we factor in that 1 point what's about between 50% and 20% of our portfolio. So when we look at our overall rates, in Q1, our overall rate was 3%. So that was higher than that long-run loss cost trend. And in this quarter, the overall P&C rate was 4%. So, both quarters being ahead of that 2.5 point loss cost trend. So hopefully that gives a little bit of…

Yes, that's very helpful. Thank you. And can you shed some perspective on the Child Victims Act in New York? And how you are thinking about it? How the industry should be thinking about it? And what it means for states outside of New York?

Sure. So we have been following this legislation that's issue for quite some time. It's not new. We have been considering the potential impact to our reserves all along, and that consideration continues to be part of how we think about overall reserve position. Now remember, our claim department has been handling these types of claims for years. So we are well positioned to deal with whatever may come. Or, we have to wait and see how much new claim activity is generated from New York and any of the other states as a result of these statutes. Let me just say as I sit here today, I feel really good about our overall reserve strength.

In your initial reserves that you had set let's say prior to the beginning of this year when the law changed, did you have reserves up for a assumption that there was a probability that the statute of the limitations will be waived?

Look, I'm not going to get into the specifics on how we would split IBNR into different buckets, but I just will reiterate what I said. We've been factoring this into our thinking over time.

Okay, thank you very much.

We will now take the next question from the line of Gary Ransom from Dowling & Partners. Q – Gary Ransom: Yes, good morning. I wanted to ask a little bit about expenses. The expense ratio in specialty was up about a point and split more or less equally between acquisition and underwriting. And then when I look at commercial, the other underwriting expense ratio is up a little bit there too. I just wondered if you can give us a sense of what's going on and especially in light of the various expense initiatives you have underway.

Sure, Gary. On specialty, specifically we did in the quarter have a couple of one-time adjustments to our acquisition costs. So we would expect that not to reoccur going forward. With regard to the underwriting side and this would be in terms of both specialty and commercial, one of the things that we're seeing is we've shown good growth on a gross premium basis. It's been a little bit less on a net premium written basis, and then even less as there's a lag as that premium written earns. Though one of the things you're seeing there is just earned net written premium being a little lower and lagging what we've been doing more recently. So, when we think forward on our expense ratio we would expect to see some improvement there. Q – Gary Ransom: Okay, that's helpful. And just wanted to shift to loss trends, thanks for that, it is description of the long-term trends but one of the concerns in the market today is whether those trends themselves are accelerating even as the rate is accelerating. And I'm wondering if you are thinking about that or how you're thinking about the potential risk involved in the two and a half suddenly becomes three and a half or four.

Yes, we remember that two and a half is our long run loss cost trends. And so when we look at our portfolio, we do it on a very granular basis and we have parts of that portfolio, healthcare as an example where that loss cost trend today is getting close to double-digits and so clearly when you're seeing rate increases for example in healthcare of 14% in the quarter, that's being offset by an increased loss cost trends in that business. And on the flip side, as I mentioned Affinity and Surety, they have been getting rate increases and not seeing loss cost trends. So, there is a lot of things happening underneath the covers there and we're monitoring it closely and there's a heavy correlation where we're getting rate versus what's happening with the short term loss costs. Q – Gary Ransom: Okay, and just maybe one last question on worker's comp, there's some signs of change there meaning maybe rates are bottoming and few places starting to go up. Do you have any thoughts on those trends?

I think from a rate perspective that is what we're seeing, so we're starting to see rate flattening a bit maybe starting to get less negative than it has been. So certainly, we're seeing that. I mean just to put it in the context of loss cost trends there, we're also starting to see frequency flatten a bit even if severity has maintained a quite a benign spot. Q – Gary Ransom: Okay, that's helpful. Thank you very much.

You bet.

We will move on to the next question from Meyer Shields from KBW. Please go ahead.

Great, thanks. Two C&A questions and then one big picture industry question if I can. First I was hoping you could talk us through how much of the commercial specialization effort. How much can that accomplish in terms of closing the combined ratio gap between the two segments?

I mean look it's clearly showed itself to be very, very effective within specialty and ultimately over the last two and a half years that I've been here, we focused on a host of different underwriting priorities that I've talked to you about and one of the other things clearly I've become comfortable with in understanding is those segments where we really have some competitive advantage, and the competitive advantages really across the supply chain. We have good underwriting, we have good capacity, risk control, claims and so what we want to do is to now funnel more of the investment in resources into those specific areas and we de-prioritize the ones with less advantage. And you clearly saw that happening with the decisions we made on some of the property and other segments within our underlying -- our international business. Now is really the time, everything is done methodically, it was done methodically over the last 2.5 years. And so, we have to get the certain initiatives, whether it was institutionalizing more of the underwriting culture, building those distribution relationships, enhancing our talent. And now is the time and the opportunity for us to really prioritize the specialization, what additional efforts and investments and some resources. And I think this is just when you add this tenant this vector of success to the other ones, I think it's just going to support our glide path to stop cortile performance because ultimately, it's when you have a competitive advantage of specialization really across the value chain that you can sustain profitability. And I think you see it even within an area like James just referenced of healthcare, where it is challenged some of those claims trends, but our market leader position having been in it for 20 years, we have the clout to be able to execute the new terms and conditions and the pricing that we need for us to stay in that marketplace and continue to see profitability overtime, so difficult for me to pin down exactly what the marginal gain is going to be. Look, when you think about top cortile performance for us. You know, we're at 94.6, we're a couple three points away from that. And we think there's a little bit on the loss ratio, in particular as you execute some of the continued rate in terms and conditions. And there's some on the expense ratio that James just referenced. But for long-term sustainability, it's going to come from having a value proposition that is important that transcends price. And so, that's sort of the best way I can describe it Meyer.

Yes. That's very helpful. Thank you. Can -- I think maybe a question for James, I was hoping you could talk a little bit about why we lost trend and affinity is as low as it is?

Why it is?

Yes.

Well, listen, we've been in that business for a long time. It is a very homogeneous business with lots of small accounts. And we have a competitive advantage and we have very strong relationships with our partners in that business. And great data, we've been able to service clients well over time. And so, I think all those kinds of give a fundamental advantage to us. And I don't think there's much more to it than that.

Yes. And so, with that competitive advantage, you can sustain the pricing and the terms and conditions you need to be able to keep it profitable, just as James says indicating.

Right now, I understand all that. And it's clearly showing up. I was just wondering what is it about the business the business set that produces such well lost trends.

I don't know if there's any other magic to it, Meyer besides that.

Okay, no, I can say our expertise would do it. And then, big picture question, it's sort of a follow-on Gary's question; we've had a lot of really strong profits and rate reductions and workers compensation at some point in time, or is that going to conflict with normalizing lost trends that the industry is not anticipating?

Well, we not -- that is always, that's always going to be the question is, can the industry and frankly for us, more importantly, are we making sure that we see any inflection points that come whether it be in frequency or severity, so that we can ensure that we're getting appropriate price when that happens?

Okay. Thank you very much.

You bet.

[Operator Instructions] We'll take the next question from Jay Cohen from Bank of America Securities.

Yes, thank you. Just to switch gears a little bit, I wanted to hear more about the persistency in a long-term care block, which was favorable this quarter. Is that something that just jumps around? Or is this something that you see as maybe being more sustainable?

Jay, thanks for the question on long-term care. With regard to persistency, that is -- that's not something I would put in the camp of something you can count on for a long period of time, it's really closely aligned to us getting rate increases in different states. And seeing policyholders make choices, whether they decide to last the policy, whether they decide to reduce their benefits and maintain their current rates or actually pay the rate increases. So what we've seen over the last couple of years is people actually lapsing into what we would call non-forfeiture status, meaning they are going to take a smaller benefit and not take the rate increase or actually stop paying premium altogether. So we wouldn't expect that to stay at a high-level forever, but we're certainly happy to see for now.

And what are the average price increases you're achieving now probably varies quite a bit by state by product, but can you give us a sense of what they are?

It is a wide range by state. I mean, we are getting, in some cases, very high double-digit rates. And when I say high, I mean, in some cases that approaches 100%, all the way down to things like 10%. So you get very different outcomes, depending on the state, depending on whether it's the first-rate increase for that the policyholder is seeing or whether it's the second or third. So it's a pretty broad range. But I will tell you just overall, regulators have been much more receptive to giving us rate increases, as well as the rest of the industry, as they realize that they need carriers who write this business to be able to at least break even.

Yes. All right, thanks. That's very helpful, James. Thank you.

You bet.

It appears there are no further questions at this time. I'd like to turn the call back to Dino Robusto for any additional or closing remarks.

So, that's great. Thank you, everyone, and we'll see you in another quarter.

Ladies and gentlemen, this concludes today's call. Thank you very much for your participation. You may now disconnect.